Section 115BB of ITA, 1961 : Section 115Bb: Tax On Winnings From Lotteries, Crossword Puzzles, Races Including Horse Races, Card Games And Other Games Of Any Sort Or Gambling Or Betting Of Any Form Or Nature Whatsoever

Explanation using Example

Imagine that Mr. Sharma, a software engineer, wins a jackpot of INR 1,00,000 in a local lottery. His regular annual income from his job is INR 8,00,000. Under Section 115BB of The Income-tax Act, 1961, Mr. Sharma's lottery winnings are subject to a flat tax rate of 30%.

Here's how his tax liability would be calculated:

1. Tax on lottery winnings at 30%: INR 30,000 (30% of INR 1,00,000).
2. Tax on his regular income (after reducing lottery winnings): The income tax on INR 7,00,000 (INR 8,00,000 minus INR 1,00,000), as per the applicable tax slabs.

Mr. Sharma's total tax liability would be the sum of the tax on his lottery winnings and the tax on his reduced regular income.