The Indian government has revised the Tax Deducted at Source (TDS) rules for winnings from lotteries, crossword puzzles, and horse races, removing the cumulative ₹10,000 ($116.29) threshold for annual winnings. From 1 April 2025, TDS will be deducted only if a single transaction exceeds ₹10,000, easing compliance for operators and benefiting smaller winners. However, winners will still be taxed at a flat 30 percent on their total winnings, without any basic exemption, says Sachin Shah, Tax Partner at EY India.
“The proposed amendment does benefit increased liquidity in the hands of smaller lottery and horse race winners. However, the winners will be required to pay flat 30 percent plus applicable surcharge and cess on their total winnings without any benefit of basic exemption limit,” explained Shah while speaking to SiGMA News.
Key changes in TDS on winnings
Under the previous tax rules, if a person won multiple smaller prizes adding up to more than ₹10,000 in a financial year, TDS was deducted. The new amendment removes this cumulative threshold, requiring TDS deduction only when an individual transaction exceeds ₹10,000.
For example, earlier, if someone won three separate lottery prizes of ₹8,000 each—totaling ₹24,000—TDS was applied because the aggregate winnings exceeded ₹10,000. Under the new rule, no TDS will be deducted since no single transaction surpasses ₹10,000.
Shah explains, “Starting 1 April 2025, TDS on winnings from lottery, crossword puzzles, horse races, etc will be deducted only where the amount of winnings in a single transaction exceeds ₹10,000, as against to earlier regime of TDS deduction in case the aggregate of winnings exceeded ₹10,000 in a financial year.”
Amendment to Section 194B and Section 194BB
The changes impact Section 194B, which applies to winnings from lotteries, crossword puzzles, and games of chance, and Section 194BB, which covers winnings from horse races.
Current Rule: TDS is deducted if the total winnings from a player exceed ₹10,000 in a financial year.
New Rule (Effective 1 April 2025): TDS will be deducted only if a single transaction exceeds ₹10,000.
The explanatory memorandum to Budget 2025 states that the government aims to simplify tax compliance while maintaining the tax rate at 30 percent on winnings, plus applicable surcharges and cess.
Impact on winners and operators
This amendment offers relief to individuals with small winnings since tax will not be deducted unless a single transaction crosses the threshold.
For prize distributors and gaming operators, the new rules simplify TDS compliance. Instead of tracking cumulative winnings throughout the financial year, they will only need to deduct tax if a single payout exceeds ₹10,000.
“The revised TDS rules are likely to simplify compliance from an operator standpoint,” Shah said.
Effective from 1 April 2025, the revised TDS rules provide relief to smaller winners and reduce compliance burdens for operators. However, the tax rate remains unchanged, ensuring that winnings above ₹10,000 in a single transaction continue to attract 30 percent TDS. These changes reflect the government’s efforts to modernise tax collection while balancing ease of compliance with revenue considerations.
