The Hindu Business Line : On the big game cheques

Section 194B of the Income-Tax Act provides for tax deduction at source (TDS) on winnings from lotteries or crossword puzzles when the receipts exceed Rs 5,000. The Finance Act, 2001 amended this section to include within its coverage receipts from card and other games. Post-amendment, the operative part of Section 194B reads thus:

"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 in an amount exceeding Rs 5,000 shall at the time of payment thereof, deduct income-tax thereon at the rate in force (which rate is presently 30 per cent). The tax deducted at source is to be paid to the Central Government within one week from such deduction. Such receipts are to be taxed at 30 per cent with surcharge wherever applicable."

The objective of the 2001 amendment was to bring TV games within the purview of Section 194B. This is clear from para 152 of the Finance Minister's Budget speech: "Television game shows are very popular these days. I wish the winners well. At the same time, I propose that income-tax at the rate of 30 per cent will be deducted at source from the winnings of these and all similar game shows."

Thus, the tax on payments relating to KBC winnings is to be deducted at source as it falls under the category of "other games". This is made known by the anchor in the show. For the purposes of TDS, the tax is to be deducted at the time of payment, which is being made to the winners in front of the TV viewers.

Isn't making cheques for the full amount of winnings by the person responsible for making the payment without deduction of tax at source at the rate of 30 per cent is, prima facie, a violation of the Section 194B and liable for interest and penalty as provided in the Act?

It would be appropriate if the TV channel clarifies the position in this regard, mentions why the cheques are being made out for the full amounts without deduction of the prescribed tax at the time of payment.

(The author is a former Chairman of CBDT.)

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