Mechanism: The payer of winnings (other than online-game winnings, now in section 194BA) exceeding the threshold deducts tax at the rate in force at the time of payment; for winnings in kind, tax must be ensured before release.
Litigation profile: Sparse. Litigation is confined to characterisation of a 'winning' and the in-kind proviso — the candour rule applies.
A. SECTION COMMENTARY
Section 194B requires the person responsible for paying winnings from lottery, crossword puzzle, card game or other game of any sort, exceeding the prescribed threshold, to deduct tax at the rates in force at the time of payment. The charge it collects against is in section 2(24)(ix) (winnings as income) read with the special flat rate in section 115BB, and no deduction of expenses or set-off of losses is allowed against such winnings (section 58(4)). With the insertion of section 194BA for online games, section 194B now governs the non-online forms of winnings.
Winnings wholly or partly in kind — the first proviso
Where the winnings are wholly in kind, or partly in cash and partly in kind but the cash is insufficient to meet the tax on the whole, the payer must, before releasing the winnings, ensure that tax has been paid in respect of the winnings. The practical effect is that the prize (a car, for example) is not handed over until the tax on its value is accounted for — either recovered from the winner or borne and paid by the payer.
What is a 'winning' — the agent and unsold tickets
The deduction bites only on a 'winning'. A sum that reaches a lottery agent — for instance, prize money refunded by the State lottery directorate in respect of unsold tickets or unclaimed prizes — is not a 'winning' from a lottery within section 2(24)(ix); the agent did not purchase the ticket and did not 'win', so the receipt, if income at all, is business income outside section 194B.
Why authority is limited
The section is mechanical and the rate is flat, so litigation is sparse and concentrated on characterisation — whether a receipt is a 'winning' at all, and the operation of the in-kind proviso. In candour, the body of authority is small.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194B. The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, being the amount in respect of a single transaction exceeding ten thousand rupees *** shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :
Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings: Provided further that nothing contained in this section shall apply to deduction of income-tax on winnings from any online game on or after the 1st day of April, 2023.
Explanation.—For the purposes of this section, "online game" shall have the meaning assigned to it in clause
Candour rule observed. The authority is concentrated on what counts as a 'winning' and on the in-kind proviso.
What is a 'winning'?
Director of State Lotteries v. Assistant Commissioner of Income-tax (1999) 238 ITR 1 (Gau)
Issue: Whether prize money refunded to the organising agent in respect of unsold tickets and unclaimed prizes is a 'winning' attracting section 194B.
Held: No. Such a refund is not income from a lottery within section 2(24)(ix); the agent did not become the purchaser of the ticket and did not 'win'. The provisions of section 194B are not attracted; at most the receipt is business income of the agent.
Significance: Draws the line between a 'winning' (within section 194B) and a trade receipt of the lottery agent (outside it).
Rate, no set-off, and default (cognate)
Section 115BB / section 58(4) — the substantive backdrop
Principle: Winnings are charged at the special flat rate in section 115BB with no deduction for expenditure and no set-off of losses (section 58(4)); section 194B is the collection mechanism for that charge on payment.
Use: Explains why the deduction is on the gross winning and why the in-kind proviso is strict.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor under section 201(1) where the payee has paid the tax; interest under section 201(1A) runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194B.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.
CHAPTER XVII — COLLECTION AND RECOVERY OF TAX · B.—DEDUCTION AT SOURCE
Section 194B — Winnings from Lottery, Crossword Puzzle, Card Game, etc. (Tax Deducted at Source)
Case Laws & Commentary · Income-tax Act, 1961 (as amended by the Finance Act, 2026) · bharattax.co Treatise
Status: Live. Mechanical, flat-rate; lightly litigated.
Finance Act, 2026: No amendment.
Mechanism: The payer of winnings (other than online-game winnings, now in section 194BA) exceeding the threshold deducts tax at the rate in force at the time of payment; for winnings in kind, tax must be ensured before release.
Litigation profile: Sparse. Litigation is confined to characterisation of a 'winning' and the in-kind proviso — the candour rule applies.
A. SECTION COMMENTARY
Section 194B requires the person responsible for paying winnings from lottery, crossword puzzle, card game or other game of any sort, exceeding the prescribed threshold, to deduct tax at the rates in force at the time of payment. The charge it collects against is in section 2(24)(ix) (winnings as income) read with the special flat rate in section 115BB, and no deduction of expenses or set-off of losses is allowed against such winnings (section 58(4)). With the insertion of section 194BA for online games, section 194B now governs the non-online forms of winnings.
Winnings wholly or partly in kind — the first proviso
Where the winnings are wholly in kind, or partly in cash and partly in kind but the cash is insufficient to meet the tax on the whole, the payer must, before releasing the winnings, ensure that tax has been paid in respect of the winnings. The practical effect is that the prize (a car, for example) is not handed over until the tax on its value is accounted for — either recovered from the winner or borne and paid by the payer.
What is a 'winning' — the agent and unsold tickets
The deduction bites only on a 'winning'. A sum that reaches a lottery agent — for instance, prize money refunded by the State lottery directorate in respect of unsold tickets or unclaimed prizes — is not a 'winning' from a lottery within section 2(24)(ix); the agent did not purchase the ticket and did not 'win', so the receipt, if income at all, is business income outside section 194B.
Why authority is limited
The section is mechanical and the rate is flat, so litigation is sparse and concentrated on characterisation — whether a receipt is a 'winning' at all, and the operation of the in-kind proviso. In candour, the body of authority is small.
B. STATUTORY POSITION (verbatim text)
Reproduced from the Income-tax Act, 1961 as amended up to the Finance Act, 2025 (the Finance Act, 2026 makes no amendment to this section). Editorial markers “***” denote text omitted by the Legislature.
194B. The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, being the amount in respect of a single transaction exceeding ten thousand rupees *** shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :
Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings: Provided further that nothing contained in this section shall apply to deduction of income-tax on winnings from any online game on or after the 1st day of April, 2023.
Explanation.—For the purposes of this section, "online game" shall have the meaning assigned to it in clause
(iii) of the Explanation to section 115BBJ.
C. AUTHORITIES
Candour rule observed. The authority is concentrated on what counts as a 'winning' and on the in-kind proviso.
What is a 'winning'?
Director of State Lotteries v. Assistant Commissioner of Income-tax (1999) 238 ITR 1 (Gau)
Issue: Whether prize money refunded to the organising agent in respect of unsold tickets and unclaimed prizes is a 'winning' attracting section 194B.
Held: No. Such a refund is not income from a lottery within section 2(24)(ix); the agent did not become the purchaser of the ticket and did not 'win'. The provisions of section 194B are not attracted; at most the receipt is business income of the agent.
Significance: Draws the line between a 'winning' (within section 194B) and a trade receipt of the lottery agent (outside it).
Rate, no set-off, and default (cognate)
Section 115BB / section 58(4) — the substantive backdrop
Principle: Winnings are charged at the special flat rate in section 115BB with no deduction for expenditure and no set-off of losses (section 58(4)); section 194B is the collection mechanism for that charge on payment.
Use: Explains why the deduction is on the gross winning and why the in-kind proviso is strict.
Hindustan Coca-Cola Beverages (P) Ltd. v. CIT (2007) 293 ITR 226 (SC) — cognate on default
Principle: No second recovery from the deductor under section 201(1) where the payee has paid the tax; interest under section 201(1A) runs for the period of default.
Use: Governs the consequence of a failure to deduct under section 194B.
Compiled for the bharattax.co Treatise on the Income-tax Act, 1961 (as amended by the Finance Act, 2026). Statutory text is reproduced verbatim from the bare Act; case-law citations have been web-verified. Where a section is new, narrow or substantially unlitigated, the candour rule is observed — the absence of direct authority is stated and only genuinely cognate authority is offered. This digest is for professional reference and is not a substitute for the official report of any judgment.