Complete Guide to Lottery Tax (TDS) in India (2025)

Winning the 1st Prize in the Nagaland State Lottery is a dream come true. Seeing that "1 Crore" figure is life-changing. However, many winners are shocked when the actual amount credited to their bank account is significantly less.

This discrepancy is due to TDS (Tax Deducted at Source). In this guide, we will explain exactly how lottery taxation works in India under the Income Tax Act, specifically Section 194B.

The Golden Rule: Flat 30% Tax

Unlike your regular salary income, which is taxed based on "slabs" (0%, 5%, 20%, etc.), lottery winnings are considered "Casual Income."

• Rate: A flat 30% tax applies to all winnings.
• Threshold: This applies to any prize money exceeding ₹10,000.
• No Deductions: You cannot claim expenses (like the cost of buying tickets) as a deduction against this income.

Surcharge and Cess: The Hidden Costs

It's not just 30%. You also have to pay:

1. Surcharge: If the winnings are very high (over ₹50 Lakhs), a surcharge of 10% to 37% may apply on the tax amount.
2. Health & Education Cess: A 4% cess is added to the total tax liability.

Therefore, the effective tax rate often comes out to be around **31.2%** for most major winners.

Calculation: 1 Crore First Prize

Let's calculate the exact amount you take home if you win the Dear Morning/Evening 1st Prize:

Do I need to file ITR?

Yes. Even though the tax is deducted at the source (TDS), you must declare this income when filing your Income Tax Return (ITR). The lottery department will issue you a Form 16A, which serves as proof that tax has been paid.

Conclusion

While taxes take a significant chunk, winning the lottery remains a windfall. Being aware of these calculations helps you plan your finances better and avoid surprises when the check arrives.