Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: TDS :: TAX RATES - GOODS TAXABLE @ 4% :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARD :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: VAT RATES :: list of goods taxed at 4% :: VAT Audit :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: form 3cd :: cpt :: due date for vat payment :: empanelment
 
 
News Headlines »
 Use ITR-2 to show salary and capital gains income
  TDS Applicability On Government Contracts Under Gst (Under Section 51 Of The Cgst Act, 2017)
  How to file ITR for FY 2016-17 and all the links you need
 All about E-way Bill under GST
 Good and simple tax: on the GST regime
 Seeks to extend the time limit for filing of GSTR-1, GSTR-2 and GSTR-3
 Good news, find Tax Return Preparers soon at a place near you; 5 things to know
 Filing of GST return
 Why cement companies are going in for M&As
 Govt moves to rework direct tax law after PM’s nudge
 New offer available for filing tax returns online, how to avail

Free gifts may have a tax tag
November, 13th 2007

Visit a mall this festive season and you are likely to see some huge hoardings announcing bumper draws with prizes of food hampers, gift coupons, diamonds and so on. If you are lucky enough, even a fancy car could be yours. You cannot fail to spot this, as the car revolves seductively at the malls entrance enticing everyone who visits the mall.

Namita is not a shopaholic, but last Saturday is a day she will never forget. She stepped in at a local mall and was immediately found surrounded by a bevy of models. Before she could react, she was crowned and an announcement was made that as she was the millionth customer during the season and she had just won herself a brand new car. But then followed the tax googly.

She found out to her dismay that she has to cough up income tax of 33.99% or Rs 17 lakh approximately against the cars value of Rs 50 lakh. Unfortunately, this is what is specified in the Income tax Act, 1961.

The person who pays winnings of lotteries, which is the technical nomenclature, is obliged to deduct income tax at a flat rate of 33.99% (inclusive of surcharge and education cess) from any such payments in excess of Rs 5,000, and deposit it with the government within the given timeframe, stipulated as per the provisions of the Act.

Taxes are to be withheld even against winnings in kind. The value of winnings in kind shall be the actual cost to the payer.

Thus in this case, in all practical reality, the shopping mall, which is obliged to deduct tax at source, would request Namita to pay up Rs 17 lakh before letting her drive off in her brand new car. Had it been a cash award, the shopping mall would have deducted the tax from the cash prize and handed the balance amount to Namita.

Now, what constitutes income from winnings of lotteries, which carries with it the obligation to withhold tax at source? Recent changes in the Act have amended the meaning of the term lottery by including winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called.

In the hands of Namita, the gross amount of winnings is taxable as Income from other sources and the tax is calculated at a flat rate of 33.99%, irrespective of the quantum. The basic exemption limit of Rs 1 lakh is not available for such income and no deduction, whatsoever, is allowed in respect of any expenditure that may have been incurred in earning such income.

Further, losses incurred under any other head of income cannot be set-off against such winnings. Of course, Namita can take a credit in respect of taxes deducted at source by the payer while determining the net taxes payable by her for that particular financial year. So, the next time you earn a windfall gain like Namita, you know what to expect and what not to.
(Ernst & Young)

 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2017 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - We Bring IT. Offshore software outsourcing company. We use Global Delivery Model (GDM) and believe in Follow The Sun principle

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions