To prevent tax evasion and money laundering, the Ministry of Home Affairs on Monday suggested that lottery winnings be distributed through formal banking channels.

In a written reply to query raised in the Lok Sabha, Minister of State for Finance Pankaj Chaudhary said, “Ministry of Home Affairs sought views from Department of Revenue, Ministry of Finance through the said OM (office memorandum) regarding possibility of disbursement of prize amount of lotteries through formal banking channel. Ministry of Home Affairs has also sought views of all states on the same issue.”

The winnings from lottery, crossword and commission from sale of lottery tickets are subject to Tax Deduction at Source (TDS) under sections 194B and 194G of the Income Tax Act.

Despite the law, there have been instances of people claiming the winning prize but not paying the required tax or using the lottery as money laundering. With that in mind, the government is planning to bring in the aforementioned changes to keep a track of transactions.

Previous threshold for TDS was set at Rs 10,000 but was removed entirely after people started withdrawing winnings in parts in order to evade taxes.

Chaudhary said that whenever the government receives reliable evidence or intelligence about a taxpayer violating the Direct Tax Laws, the Income Tax Department launches appropriate investigation.

Chaudhary, on the other hand, also responded to member questions over 28% GST on online gaming, casino and horse racing. He reassured that the GST Council had conducted detailed deliberation on the matter before arriving at the decision. He further stated that the ministry has provisions in place to take actions against illegal offshore betting platforms luring in youth.