How Much Lottery Tax You Need To Pay In India

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In India, the taxation laws surrounding lottery winnings are strict, extending beyond just local games. Even when participating in online lotteries from India, players are subjected to both the lottery tax in the country where the game is played and in India itself. 

This is a fact that many Indian lottery players may not be aware of, prompting a need for further explanation on the subject of lottery tax in India. Rest assured that, despite any deductions made, lottery prizes remain impressive.  It is imperative to comprehend the tax obligations and the actual amount received to avoid any surprises while claiming the winnings.

How Does Lottery Tax Work in India?

Many people in India dream of winning the lottery and changing their lives. One of the most popular lotteries in the country is the Kerala lottery. Here is today Kerala lottery jackpot result, which could make someone a millionaire. Suppose you win this lottery, then lottery winnings above Rs. 10,000 in India are subject to taxation without exception. 

The Income Tax Act of 1961, specifically Section 56(2)(ib) which deals with “Income From Other Sources”, was amended in 2001 by the Finance Act to include “online game” formats. 

Hence, the term “lottery” encompasses any and all rewards or remunerations that an individual may obtain through happenstance, draw of lots, or any other mode, under any design or agreement, irrespective of the label employed.

Winning less than Rs 10,000 in India does not raise any tax concerns. However, if the winnings exceed this threshold, the tax rate, previously set at 30.9%, has been increased to 31.20%. Although the government charges a tax rate of 30.00%, there is a 4.00% health and education cess added as a surcharge, resulting in a net deduction of 31.20% for big jackpots.

If the tax is not deducted from your winnings automatically, it is essential to report the exact amount and pay the tax. It is recommended to pay the tax before spending the lottery money. If you play an online lottery then the website you use will provide instructions to help you with the process. It is not advisable to conceal any facts regarding the winnings as it may result in penalties.

Taxes On Lottery By Indian Government

When participating in the Government lottery in India, There are no exceptions to the aforementioned rules, except for the absence of additional deductions. In other words, you can play your state lotteries, but lottery winnings exceeding Rs 10,000 are subject to a 31.20% tax rate.

It’s important to note that regular tax calculations are separate from lottery winnings tax, meaning that the latter will not affect your overall tax rate. Therefore, your regular taxes will remain unaffected, and your income source will not impact your lottery winnings’ tax.

India’s Online Lottery Tax

It is possible that you were caught off guard when you discovered that the kind of lottery you choose can significantly influence your ultimate prize amount. As someone who once found themselves in a similar situation, I can attest to the simplicity of understanding why this is the case.

For instance, let’s say you are currently residing in the US, much like many Indian international lottery winners. If you were to purchase a $100 million Powerball jackpot ticket and happen to win, the prize money you receive would be substantially less. Typically, prizes are reduced by around 40% if you opt for a lump-sum payment, also this reduction is replicated by most online lottery sites.

Similarly, the same logic is applicable to SuperEnalotto, but few lottery sites may not apply any deductions. Therefore, Playing on websites with no or lower reductions is recommended to avoid losing around 20% of your prize money as per the terms and conditions.

Indian Lottery Tax Examples

Multi-State American Lotteries (MUSL)

Game Powerball
Total Prize $ 30,000,000
MUSL Deduction ( – 40.00%)
Prize prior to Indian Taxes $ 18,000,000
Income Tax In India on Lotteries ( – 31.20%)
Prize After The Taxes $ 12,384,000

Assuming you win a MUSL jackpot that is of $30 million then you can expect to receive only $12.38 million after paying all the taxes even after choosing a lottery site that has the lowest tax rates or fees.

Lottoland’s Superenalotto Or Thelotter’s Superenalotto

Game SuperEnalotto
Total Prize € 30,000,000
SuperEnalotto Deduction ( – 20.00%)
Prize prior to Indian Taxes € 24,000,000
Income Tax In India on Lotteries ( – 31.20%)
Prize After The Taxes € 16,512,000

There exists a particular circumstance that is unique to LottoLand’s SuperEnalotto or theLotter’s SuperEnalotto. If you opt to play this game on Jackpot.com or LotteryWorld, the initial deduction amounts to only 12%, and you would receive € 18.16 million after applicable taxes, rather than the 20% deduction that is applicable on other platforms.

Different Lottery Games

Game Euromillions
Prize prior to Indian Taxes € 30,000,000
Income Tax In India on Lotteries ( – 31.20%)
Prize After The Taxes € 20,640,000

 

For lotteries that are not explicitly covered by any specific regulations, Indian income tax is the only tax applicable.

What Is The Best Way To Avoid Tax On Lotteries In India?

Lottery taxes are a compulsory requirement in India, and evasion is not possible. For winnings exceeding Rs. 10,000, individuals are obligated to pay 31.20% in taxes. Nevertheless, a strategy could be employed for smaller prizes.

Suppose you win Rs. 150,000 via lottery tickets. Withdrawing the entire sum at once would result in a tax deduction of Rs. 46,800, leaving you with only Rs. 103,200. Conversely, withdrawing amounts below Rs. 10,000 multiple times would help you evade Indian lottery taxes.

However, this strategy isn’t without risks. It is critical to review the terms and conditions when you choose a website to ensure that withdrawal limits per week, day, or month are not in place. This approach entails receiving several small payments rather than a single lump sum.

Moreover, it is imperative to abide by local laws and regulations and refrain from concealing your winnings. These penalties for non-compliance with tax laws are more severe than simply paying taxes.