India considers new rules for lottery winnings

India’s Ministry of Home Affairs suggests channelling lottery winnings through formal banking and tightening regulations on prize disbursement.

India.- The Ministry of Home Affairs has recommended the adoption of formal banking channels for the distribution of lottery winnings. The move is proposed as a way to prevent tax evasion and money laundering vulnerabilities

The proposal can be traced to a written response from minister of State for Finance, Pankaj Chaudhary. The query, raised in the Lok Sabha (the lower house of India’s bicameral Parliament), garnered attention as the government sought solutions to address tax evasion associated with lottery proceeds.

According to G2G News, lottery winnings, including those from crossword puzzles and commissions from ticket sales, are subject to Tax Deduction at Source (TDS) under sections 194B and 194G of the Income Tax Act. However, the effectiveness of these provisions has come under scrutiny due to instances of people avoiding tax obligations or exploiting lotteries for illicit financial activities.

People began withdrawing winnings in part to evade taxes after the previous threshold for TDS was set at Rs10,000.