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Tax Deducted at Source

Is the prize money received in a game show, a contest or the interest paid on auto loan subjected to TDS deduction. Read ahead to know the legalities of Tax Deducted at Source (TDS)

1. TDS on prizes
Recently I won a car in a game show as a prize. The organizers of the show are now pressurizing me to deposit TDS for this car before handing it over to me. Is it not the duty of payer of an income to deduct tax? Also, since this is a car how can something be deducted from it?
Shivani Kapoor, Delhi

Congratulations on your windfall. However, as the saying goes, you should not look a gift horse in the mouth. The law is very clear: all winnings from any kind of lotteries; prizes and cash awards won under game shows; entertainment programmes on television; incomes from crossword puzzles; and any other income from any games of any sort; or from betting or gambling of any kind is taxable income.

When somebody wins anything of this nature, whether it be in cash or kind, the organiser of the show or the game is supposed to deduct tax at source at 30 per cent, plus surcharge before handing over the prize to the winner. As far as your point about the difficulty of deducting something from a car goes, there is no distinction between prizes won in cash or in kind. Both are subject to deduction of tax at source. The organisers have to deduct tax at source in case the aggregate amount of winning is in excess of Rs. 5000.

In case the winning are in cash it is easier to deduct tax and pay the balance. However in case of winnings in kind the organisers responsible for handing over the prize may ask the winner to deposit the tax before releasing the prize. This is so because the ultimate duty of paying taxes is of the individual winning the prize. The organiser is only collecting and depositing tax on behalf of the Government. Pay your tax and then enjoy your new car.

2. TDS on Interest Paid

Our company has taken auto loan for the purchase of cars of the company. Do I have to deduct TDS on the interest component of the car loan repayments?
Bharat Raj, Delhi

The liability to deduct TDS on the interest arises if interest payment exceeds Rs.5000 p.a. However, there is no liability to deduct TDS if interest payment is made to banks or public financial institutions. In my opinion, if your car is financed by an NBFC then you should deduct TDS as per rules.