Deduction of tax at source-Sections 194B and 194BB of the Income-tax Act, 1961-Deduction from winnings from lotteries or crossword puzzles or horse races-Rates of tax applicable during the financial year 1987-88 - Income Tax - 485/1987

Deduction of tax at source-Sections 194B and 194BB of the Income-tax Act, 1961-Deduction from winnings from lotteries or crossword puzzles or horse races-Rates of tax applicable during the financial year 1987-88 Circular No. 485 Dated 27/5/1987 From Shri B. Nagarajan, Director, Central Board of Direct Taxes. To All State Governments (including Union Territories Administration) All Race Clubs. Sir, Subject: Deduction of tax at source-Sections 194B and 194BB of the Income-tax Act, 1961-Deduction from winnings from lotteries or crossword puzzles or horse races-Rates of tax applicable during the financial year 1987-88. I am directed to invite a reference to this Department's Circular No. 467 [F. No. 275/69/86-IT (B)] dated 21-8-1986 [printed at [1986] 161 ITR (St.) 125] and Circular No. 478 [F. No. 275/106/86-IT (B)] dated 14-1-1987 [printed at [1987] 164 ITR (St.) 147] on the above subject, wherein the rates at which deduction of tax under sections 194B and 194BB to be made during the financial year 1986-87 from winnings from lotteries or crossword puzzles or horse races were communicated. 2. According to the provisions of section 115BB of the Income-tax Act, 1961, any income of a casual and non-recurring nature of the type of winnings from lotteries, crossword puzzles, races including horse races, etc., will be charged to income-tax at a flat rate of 40%. According to the provisions of sections 194B and 194BB, every person responsible for paying to any person, whether resident or non-resident, any income by way of winnings from lotteries or crossword puzzles or horse races in any amount exceeding Rs. 5,000 is required to deduct income-tax therefrom at the rates specified in this behalf in the Finance Act of the relevant year. In other words, no tax shall be leviable in respect of winnings from lotteries, crossword puzzles, horse races, etc., where the amount received from such winnings together with any sum received as casual and non-recurring receipt in the aggregate does not exceed Rs. 5,000 in a year. Where such winnings exceed Rs. 5,000, tax is to be deducted at source at the rate of 40% on the gross winnings after treating Rs. 5,000 exempt under the provisions of section 10(3) of the Income-tax Act, 1961. The term "gross winnings" appearing herein means the payment received by the prize winners after deduction of the amount to be paid to commission agents. 3. The Finance Act, 1987, has inserted a new section 203A in the Income-tax Act, 1961, with effect from 1-6-1987. The new section reads as under: "203A. (1) Every person deducting tax in accordance with the provisions of sections 192 to 194, section 194A, section 194B, section 194BB, section 194C, section 194D and section 195, if he has not been allotted any tax deduction account number shall, within such time as may be prescribed, apply to the Income-tax Officer for the allotment of a tax deduction account number. (2) Where a tax deduction account number has been allotted to a person, such person shall quote such number:- (a) in all challans for the payment of any sum in accordance with the provisions of section 200; (b) in all certificates issued in accordance with the provisions of section 203; (c) in all the returns delivered in accordance with the provisions of sections 206, 206A and 206B to any income-tax authority; and (d) in all other documents pertaining to such transactions as may be prescribed in the interests of revenue." The Finance Act, 1987, also has substituted with effect from 1-6-87 section 206 of the Income-tax Act, 1961, with the following new section: "206. The prescribed person in the case of every office of Government, the principal officer in the case of every company, the prescribed person in the case of every local authority or other public body or association, every private employer and every other person responsible for deducting tax under the foregoing provisions of this Chapter shall prepare, within the prescribed time after the end of each financial year, and deliver or cause to be delivered to the prescribed income-tax authority, such returns in such form and verified in such manner and setting forth such particulars as may be prescribed." A detailed circular in this regard will be issued separately. In the meantime, the person responsible for deducting tax at source under section 194B and 194BB should apply to the concerned Income-tax Officer for the allotment of tax deduction account number. 4. The rates of deduction of tax at source under sections 194B and 194BB during the financial year 1987-88 as specified in Part II of the First Schedule of the Finance Act, 1987, are as under:- Rates of income-tax ( i ) In the case of a person other than a company : ( a ) where the person is resident in India 40 per cent; ( b ) where the person is not resident in the amount of the income; income-tax at 30 per cent of India or income-tax in respect of income at the rates prescribed in Sub-Paragraph I of Paragraph A of Part III of the First Schedule to the Finance Act, 1987 [ Annex I ], if such income had been the total income, whichever is higher. ( ii ) In the case of a company : ( a ) where the company is a domestic company 21.5 per cent; ( b ) where the company is not a domestic company 65 per cent. Explanation .-For the removal of doubt, it is however clarified that on finalising the assessment, the amount of gross winnings should be taxed in accordance with section 115BB and tax shall be levied on the amounts in cases of all such persons at the rate of 40 per cent. as provided in section 115BB of the Income-tax Act. 5. These instructions are not exhaustive and are issued only with a view to helping the persons responsible for making deduction of tax at source under these sections. Wherever there is difference of opinion, a reference should always be made to the provisions of the Income-tax Act, 1961, and the relevant Finance Act through which the changes in law are made. In case any assistance is required, the Income-tax Officer concerned or the local Public Relations Officer of the Income-tax Department may be approached for the same, who will, if necessary, obtain orders of the higher authority in the matter. 6. The contents of this circular may please be brought to the notice of all concerned. 7. Copies of this circular will be available with the Director of Inspection (RS PR), 6th Floor, Mayur Bhawan, New Delhi. Yours faithfully, (Sd.) B. Nagarajan, Director, Central Board of Direct Taxes.