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Lottery prizes are taxed before they reach you. Here is how TDS under Section 194B works, what rate applies, and what to check when you claim.
Winning a lottery is only half the story. In India, lottery winnings are taxed, and the tax is taken before the prize reaches you. Many first-time winners are shocked to receive far less than the announced prize. Understanding the rule in advance removes the surprise and helps you plan.
Under Section 194B of the Income Tax Act (renumbered as Section 393 under the Income Tax Act 2025), tax must be deducted at source (TDS) on lottery winnings above ₹10,000 per transaction, at a flat rate of 30%. Three details matter. First, once the ₹10,000 threshold is crossed, TDS applies to the full winning amount, not just the part above ₹10,000. Second, the rate is flat: it does not depend on your income slab, and no deductions or exemptions can be set against this income. Third, the organiser — not you — is responsible for deducting the tax before paying the prize.
Take a ₹1 Crore first prize. TDS at 30% is ₹30,00,000. A 4% health and education cess applies on the TDS itself, adding ₹1,20,000. Total tax deducted is ₹31,20,000, so the winner receives ₹68,80,000 before any surcharge. On very large prizes, a surcharge may also apply, pushing the effective rate higher. The announced prize is never the amount that lands in your account.
If a single win is ₹10,000 or less, no TDS is deducted at source. That does not mean the win is tax-free. Lottery income is taxable as income from other sources and must be declared in your income tax return, where it is taxed at the same flat rate. No TDS deducted simply means you settle the tax when you file, instead of having it cut from the prize.
TDS applies to non-cash prizes too — a car, house or jewellery prize is taxed on its market value. In such cases the organiser collects the tax from the winner before handing over the prize, since there is no cash amount to deduct from. If someone offers you a “tax-free” prize of any kind, treat it as a scam: genuine prizes always carry this tax treatment.
When you claim a large prize, collect the TDS certificate (Form 16A) from the payer and keep your claim receipt. Check that the deducted tax appears in your 26AS and Annual Information Statement (AIS), so you can claim full credit for it when you file your return. Missing TDS entries are a common cause of tax notices, and they are much easier to fix with documents in hand.
The most common mistake is budgeting the full announced prize. The second is forgetting to declare small wins. The third is trusting anyone who promises to “save” your lottery tax for a fee — the flat 30% treatment leaves no room for such schemes, and the fee is simply another loss. If you win a very large amount, a short consultation with a chartered accountant is worth far more than any tip or shortcut.
Tax rates and thresholds change with budgets and new legislation. Treat this guide as general information about how the system works today, not as personal tax advice. For a large win, confirm the current rules with a tax professional before you claim.
Lottery Sambad is an unofficial reference and is not affiliated with any state lottery department. Always verify a winning ticket against the official gazette before claiming a prize.
Daily Dear draws at 1 PM, 6 PM and 8 PM, plus seasonal bumper draws.
One draw every day at 3 PM, with a different lottery on each day of the week.
Labhlaxmi at 4 PM, the shared Dear draw at 6 PM, and Sikkim bumper draws.
Dear 50 every evening, plus Dear 100, Dear 200, Dear 20, Dear 1000 and seasonal bumpers.
Several weekly draws every afternoon, plus monthly draws and seasonal bumpers.