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Tds on prize money

Deepak Tapse (Accounts Manager - Taxation) (1771 Points)

29 December 2016

A company is offering prize money of Rs. 100000/- to the winner in compition of TV Show. In this case, if company paid TDS on behalf of winner (winner will get full amount of Rs. 100000/-), TDS is to be deposited Rs. 30300/- ( @ 30.3% on Rs. 100000/- or 43475/- (Grossingup) (30.3% on Rs. 143475/-) Pl confrim the same with relevant section.

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4 Replies

Swati (EXECUTIVE-GST) (299 Points)
Replied 29 December 2016

If u want to give 1 lac to the winner after deducting tds . then 70% of amount= 1 lac. That is, 1,42,857 is amount of winning.

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Puja Prasad (Semi-Qualified CA & Student) (336 Points)
Replied 29 December 2016

Section 194B states as under:

"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 ten thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :

Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings."

Rate in force is 30%.

Further no surcharge and education cess shall be levied on above TDS rate if payment is made to Resident Individuals.

Vaishnavi Ganesh (Chartered Accountant) (861 Points)
Replied 30 December 2016

194B - for deduction of TDS in winning. Grossing up u/s 195A.

Deductible at 30% in case the payee is a resident and 30.9% if non-resident.

A.Gopal (Partner) (63 Points)
Replied 30 December 2016

Tax will be Rs. 44718

Under Sec 195A of the Income Tax Act, where payment is effected net of tax and the tax liability is borne by the deductor, the income liable for deduction is required to be grossed up.

Such grossing up is to be done by the tax amount arrived at the rates in force for the financial year in which such income is payable.

The liability being borne by the person by whom the income is payable, the cess also need to be included for purpose of grossing up.

To comply with this the grossing up factor will be 100000*100/69.1 = 144718 and therefore the tax will be Rs. 44718.

Tax on 144718 @ 30.9% = 44718.

The rates in force at which TDS is required to be effected is covered under Sec 2(5) of the 2016 Finance Act.

Though under proviso to sub section 2(11) and 2(12) of Finance Act 2016,exempts consideratio of secondary education cess and higher secondary education cess for effecting TDS where payee is resident, I am of the view, since the pament is net of taxes and under section 195 A, the TDS is required to be grossed up by the amount of tax at rates in force, the company remits the whole of Rs. 44718 as that would be the tax liability payable by it calculated as per rates in force.