Ask Money Today: How is lottery prize taxed?

I had booked one plot under a draw system. I won a car in the draw. The developer has collected 30 per cent tax and has issued me a TDS certificate for the same. I want to know whether I can claim refund of the deducted  amount? My annual income is Rs 2 lakh.

-Shiv Gupta

By Balwant Jain, Tax and Investment expert

Any income received by you in the form of lottery or of similar nature is taxable at the flat rate of 30 per cent under Section 115BB of the Income Tax Act. The motor car won by you in the draw also falls in the category of lottery. Payer of such income is required to deduct tax at a flat rate of 30 per cent on the value of such prize. Since 30 per cent tax cannot be deducted from the motor car, the developer is justified in collecting the tax from you on the value of the motor car. In case you have been filing your income tax returns, you will have to include such income. So, while filing your income tax returns, you will be able to adjust such TDS against your liability for such income. However, note that since the income on lucky draw is taxable @ flat rate of 30 per cent and the TDS has also been made at the same rate, you should not expect any refund.

You cannot adjust the shortfall of Rs 50,000 in your regular income to the extent of basic exemption of Rs 2.50 lakh under the Income Tax. Also, no deductions against such income are allowed under Chapter VIA for items like life insurance premium, mediclaim, PPF etc. However, in case the value of your total income including the value of the car won by you does not exceed Rs 5 lakh, you can avail rebate upto Rs 12,500 under Section 87A of the IT Act.

(Views expressed by the investment expert are his/her own. E-mail us your investment queries at askmoneytoday@intoday.com. We will get your queries answered by our panel of experts.)

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