Kochi, 05 March (H.S): The Income Tax Department has issued notices to several winners of the Kerala State Lottery, demanding payment of additional tax liabilities, including surcharge, health and education cess, penalties and interest for failure to file income tax returns.

According to officials, many lottery winners had assumed that their tax obligations were fully settled because the Kerala Lottery Department deducts tax at source before releasing the prize money. However, the department has now clarified that additional statutory payments and compliance requirements still apply, and failure to meet them has resulted in notices being served to several prize winners.

Under the current system, a 12 per cent agent commission and a 30 per cent income tax are deducted from the prize amount before it is disbursed to the winner. For instance, in the case of a prize worth ₹1 crore, ₹12 lakh is deducted as agent commission and ₹26.40 lakh as income tax. After these deductions, the winner receives ₹61.6 lakh from the Lottery Department.

However, tax experts say this deduction does not cover all statutory liabilities. Winners are also required to pay an additional four per cent Health and Education Cess on the taxable amount. Further, if the amount remaining after commission exceeds ₹50 lakh, a 10 per cent surcharge is applicable. Many winners were reportedly unaware of these additional obligations, which has now placed them in a difficult situation.

Another major reason for the notices is that several prize winners failed to file their Income Tax Returns (ITR) for the financial year in which they received the lottery prize. Some individuals believed that since tax had already been deducted at source, filing an income tax return was unnecessary.

Officials said that non-filing or delayed filing of returns attracts penalties and interest. In addition to the unpaid surcharge and cess, winners may now have to pay a penalty calculated on the outstanding amount, along with interest at one per cent per month.

Under income tax provisions, individuals who miss the deadline can file an updated return within one year by paying an additional 25 per cent of the tax due, and within two years by paying 50 per cent of the tax amount as a penalty. However, reports indicate that many lottery winners have already crossed the two-year limit, making them liable for penalties that could go up to 100 per cent of the unpaid tax.

Tax authorities have advised lottery winners to review their tax filings and settle any pending liabilities at the earliest to avoid further legal action.

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Hindusthan Samachar / Arun Lakshman