Income Tax on Lottery Winnings and Gambling — Section 115BB and TDS

Winnings from lotteries, crossword puzzles, horse races, card games, online gaming and other games of chance are taxed at a flat rate of 30% under Section 115BB of the Income Tax Act — regardless of the taxpayer's income slab. TDS is also deducted at source on such winnings. Here is the complete guide.

Income Covered Under Section 115BB

• Lottery winnings (state lotteries, private lotteries)
• Winnings from crossword puzzles
• Winnings from races including horse races
• Winnings from card games, any other game, online gaming
• Winnings from gambling or betting in any form

Tax Rate — Section 115BB

• Flat rate of 30% on winnings (plus 4% education cess = effective 31.2%)
• No basic exemption limit or rebate available on this income — even if your total income is below ₹2.5 lakh
• No deductions allowed: Cannot claim any expense, loss or deduction against lottery/gambling winnings — not even expenses incurred to participate
• Cannot set off losses from one game against winnings of another
• Surcharge applies if total income exceeds ₹50 lakh

TDS on Lottery and Game Winnings

• Section 194B: TDS at 30% on lottery/crossword/game winnings exceeding ₹10,000 per transaction — deducted by the lottery organiser/game operator before paying
• Section 194BA: TDS at 30% on net winnings from online gaming (introduced from April 1, 2023) — applicable to every withdrawal and at year-end on net winnings, regardless of amount
• Section 194BB: TDS at 30% on horse race winnings exceeding ₹10,000 — deducted by the bookmaker/race club

Online Gaming — Special Rules (Section 115BBJ)

• Net winnings from online gaming (fantasy sports, skill/chance games) are taxed at 30% under Section 115BBJ
• Net winnings = Total winnings withdrawn in FY − Opening balance − Net deposits in FY
• Platform deducts TDS under 194BA on every withdrawal

Reporting in ITR

• Report winnings under "Income from Other Sources" — Schedule OS in ITR
• Claim TDS credit from Form 26AS/AIS
• ITR-1 (Sahaj) can be used if lottery income is below ₹5,000; ITR-2 for larger amounts

Conclusion

Lottery and gambling winnings face a flat 30% tax with no deductions — making prompt TDS reconciliation and correct ITR reporting essential. SPOTON provides income tax advisory and ITR filing for individuals with unusual income sources including lottery, gaming and investments across Kerala. Contact us for expert tax filing services.