Gambling is a recreational activity used by many people around the world. A lottery is a form of gambling. While some countries in the world have declared it immoral and banned it altogether, many countries have fit the lottery into a frame of laws and regulations. With specific laws and regulations regarding taxing, these governments have brought order to this business while generating income for the state at the same time. Below mentioned are the details of how different countries levy taxes on prizes won in lotteries.
Section 194B comes of the Income Tax Act makes the lottery prizes taxable. A tax of around 30.9% has to be mandatorily paid on the amount won. As this amount won’t be counted in the winner’s income amount, he/she won’t pay according to their income tax rate slab. However, all of this amount will be exempted from any kind of tax if it is donated.
In the USA, you will have to fill in certain paperwork like the IRS Form W-2G when you will ask for your payout. This will happen when you will win $600 or more on any State lottery. You will be asked for your Social Security Number. If you provide it, 25% will be cut from your winnings as a tax. If you don’t, 28% will be cut according to the federal laws and guidelines. Also, different states have different regulations regarding taxing the lottery winnings.
In Australia, no tax is levied upon lottery winnings. All the lottery amount can be claimed by the winner. However, if you are a professional gambler, you will have to pay an income tax on lottery winnings. If you are a professional gambler, you can also claim deductions for your gambling losses. The factors that are considered while classifying you as a professional gambler are-
- The time and resources that you dedicate to gambling.
- Your frequency of gambling
- Whether you have another job or source of income other than gambling.
The Russians impose high amounts of taxes on lottery prize winnings. If you live for at least 184 days in Russia, whether you are a citizen or not, you will be charged 13% on your lottery winnings. If you have stayed in the country for less than 134 days, you will have to pay a hefty 30% of all the won amount. Also, Russian citizens who play lotteries hosted by other countries need to spend some amount of their winnings to their homeland in the form of taxes.
The United Kingdom
In the UK, the lottery is not considered as an income and hence, not taxed. You will take away with you the whole sum of money that you won. However, you will have to pay taxes on this amount later. You will be taxed when you invest this money and get returns, or deposit this money into a bank and receive interest.
Although there are different rules for taxation on the prize won in the lottery, the ultimate aim is to bring regulations into the business that might become a haven for many illegal activities if left unchecked.
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