How to Declare Lottery Winnings or Prize Money in ITR for FY 2024-25
Winning a lottery, game show, or prize money is thrilling — but the taxman doesn’t let you keep all of it. Under Indian income tax law, such windfalls are taxed at a special rate, and you must report them correctly in your Income Tax Return (ITR). Whether you won a car in a lucky draw or earned lakhs from a quiz show, this guide will walk you through how to declare such winnings in your ITR, what tax is applicable, and what mistakes to avoid.
What Qualifies as Lottery or Prize Winnings?
The Income Tax Act, 1961, under Section 115BB, treats certain types of income as “Income from Other Sources”. These include:
- Lottery or jackpot winnings (offline and online)
- Crossword puzzles or quiz contest prizes
- Rewards from TV game shows (e.g., KBC)
- Lucky draws and online raffles
- Gambling, horse racing, card games, and betting
- Winnings from apps and online fantasy sports
- Gifts/prizes from competitions held in India
These are fully taxable, even if they are not in cash (e.g., winning a bike or car).
How Are Lottery Winnings Taxed?
Lottery and prize money are taxed at a flat rate of 30% under Section 115BB of the Income Tax Act.
This 30% rate does not depend on your income slab.
Additionally, Health and Education Cess at 4% is added, making the effective tax rate 31.2%.
No deductions under Section 80C, 80D, or any other sections are allowed against this income.
You cannot adjust losses (from business or capital gains) against this income either.
Tax Deducted at Source (TDS) on Prize Winnings
Under Section 194B, if the prize money exceeds ₹10,000, the organizer must deduct TDS at 30% before paying you.
Example:
If you win ₹1,00,000 in a lottery, the organizer will deduct ₹30,000 as TDS and give you ₹70,000. The deducted amount is deposited with the Income Tax Department on your behalf and is visible in your Form 26AS.
If your prize is in kind (e.g., a car), you must pay 31.2% of the market value as tax before receiving it. Some organizers may pay it for you, but then the value of tax is added to your total income.
How to Declare Lottery Winnings in Your Income Tax Return
Even if TDS has been deducted, you must report the gross income (not net received) in your ITR.
Step 1: Choose the Correct ITR Form
- Use ITR-1 if your income is below ₹50 lakh and includes only salary, house property, and other sources (excluding winnings from lotteries).
- Use ITR-2 or ITR-3 if you have winnings from lotteries or complex income sources.
Step 2: Add Winnings under 'Income from Other Sources'
In your ITR form, go to the section "Income from Other Sources" and select the appropriate category for "Winnings from lottery, crossword puzzle, races including horse races, card games, gambling or betting."
Step 3: Enter Gross Amount and TDS
If you received ₹70,000 after TDS on a ₹1,00,000 win, enter ₹1,00,000 as income and ₹30,000 as TDS in the TDS section. Verify it with your Form 26AS or AIS (Annual Information Statement).
Step 4: Complete Filing
Finish filing the ITR, verify using Aadhaar OTP, DSC, or EVC, and keep the acknowledgment for your records.
Can You Claim a Refund of TDS on Lottery Winnings?
No. You cannot claim a refund of the TDS if it was correctly deducted at 30%. Even if your total income is below the basic exemption limit, the tax on such winnings is final.
However, if excess TDS was deducted due to error (e.g., TDS at 30% on a prize of ₹9,000), you can file for a refund.
Things to Keep in Mind
- Always declare the full value, not the net received after TDS.
- No expenses like ticket cost or travel can be claimed.
- If the prize is in kind (car, TV), pay tax on market value before acceptance.
- Winnings from fantasy sports, online poker, or gaming apps also fall under this category.
- Ignoring this income can lead to scrutiny notices, penalties, and interest.
FAQ's About How to Declare Lottery Winnings in Your Income Tax Return
1. Is lottery income taxable in India?
Yes, lottery income is fully taxable in India under Section 115BB of the Income Tax Act. It is taxed at a flat rate of 30% plus 4% cess, irrespective of your income tax slab.
2. How should I declare lottery winnings in my ITR?
Declare the gross amount (before TDS) of your lottery or prize money under the head ‘Income from Other Sources’. Even if TDS has already been deducted, you must report the full amount and show the TDS separately in the return.
3. Can I use ITR-1 to file lottery winnings income?
No. ITR-1 cannot be used if you have income from lottery or gambling. You need to file ITR-2 or ITR-3, depending on your other sources of income.
4. Is TDS deducted on prize money or lottery winnings?
Yes, under Section 194B, the prize distributor must deduct 30% TDS if the prize exceeds ₹10,000. The net amount is paid to the winner after deduction.
5. Can I claim any deduction under Section 80C or 80D against lottery income?
No. You cannot claim deductions, rebates, or exemptions (like under Section 80C, 80D, or 87A) against lottery or prize winnings. The entire amount is taxed at a flat rate.
