Income from winnings from Lottery, Game Shows, Puzzle are taxable and  TDS is deducted before giving away lottery, game shows, talent shows income.

Applicability of TDS on lottery or game show income

1. If the Prize money exceeds Rs 10,000, then the winner will receive the prize money after the deduction of TDS @31.2% u/s 194B.
2. Please note that it does not matter whether the income of the winner is taxable or not. The prize distributor is liable to deduct tax at the time of payment.
3. In the case of winnings from horse races, TDS will be applicable if the amount exceeds Rs 10,000.
4. No Deduction/Expenditure is allowed from such income.
5. No deduction under section 80C or 80D or any other deduction/allowance is allowed from such income.
6. The Benefit of basic exemption limit and income tax slab rate is also not applicable to this income. The entire amount received will be taxable at the flat rate of 31.20%.

Prize Money received in Kind

1. If the prizes are given in Kind, then prize distributor shall ensure before releasing the prize that tax has been paid. Tax is paid as per the market value of the prize given. The prize distributor can either recover from the winner or he himself can bear the burden of the tax.
2. In cases where the prize is given both in cash and kind, then the total tax should be calculated on the cash portion of the prize and on the market value of the prize given in kind. And the tax amount should be deducted while giving the cash portion of the prize to the winner. But if the cash prize is not sufficient to cover the total tax liability, then either the winner or prize distributor should pay the deficit.