Winners, welfare and risks: How Indian lotteries really work

While some states have opted to prohibit them, others have accepted them as a source of revenue generation for public welfare

Lotteries in India are regulated by the Lotteries (Regulation) Act of 1998, which permits states to run and manage them. The law defines a lottery as any scheme in which prizes are drawn by chance or lot among people who buy tickets.

The states conduct lotteries through their Directorates of State Lotteries. They print tickets, hold draws, and disburse prizes. For instance, Kerala's lottery scheme, started in 1967, is still the country's most successful one. It has a network of more than 55,000 agents and 150,000 retailers and generates massive employment and finances welfare schemes through its weekly and bumper draws.

Where are lotteries legal in India?

While some states have opted to prohibit them, others have accepted them as a source of revenue generation for public welfare.

Currently, lotteries are legally run by nine states: Arunachal Pradesh, Goa, Kerala, Maharashtra, Mizoram, Nagaland, Punjab, Sikkim, and West Bengal, according to Union Minister of State in the Ministry of Home Affairs Nityanand Rai’s written reply to a query in the Lok Sabha in 2023.

How are winners selected, and how do they claim their winnings?

Winners are chosen through public, supervised draws—mechanical or computerised—to be fair and open. For example, draws for Kerala are conducted in Gorky Bhavan at approximately 3 PM and are released in the Government Gazette and on the official lottery site. Nagaland's daily Sambad draws happen at fixed times of the day, and results are posted online soon after.

To win a prize, winners are required to present the original signed ticket, filled-in claim form, valid identity proof (like PAN/Aadhaar), along with passport-size photographs and sometimes a notarised affidavit, state-dependent. For instance, in Meghalaya, prizes up to Rs 10,000 can be claimed through retailers; above that, a claim form has to be submitted to the Directorate within 30 days of supporting documents. In Nagaland, the rules are the same: tickets, claim forms, PAN/Aadhaar, and affidavits have to be furnished within 30 days, and prizes are paid by cheque, DD, or RTGS after deducting taxes.

What regulations govern lottery operations?

Lottery activities in India are regulated mainly by the Lotteries (Regulation) Act, 1998 and the Lotteries (Regulation) Rules, 2010. The Act allows state governments to conduct lotteries and gives them the power to make rules, conduct draws, and control sales. Private lotteries and unauthorised inter-state sales are banned.

States such as Kerala, Sikkim, Nagaland, and Maharashtra operate lotteries through their Directorates, and the money collected is invested in welfare schemes. The Supreme Court has also decided that lotteries amount to "betting and gambling" and therefore are a state subject with regulatory power and taxing power under Entries 34 and 62 of List II (State List).

The Lotteries (Regulation) Rules, 2010, also give further guidelines, such as restrictions on online lotteries. The Union Home Ministry has instructed states to secure the integrity of lottery software, prohibit the hybrid paper–online format, and prohibit unauthorised online ticket selling. Some states, like Punjab and Nagaland, have categorically banned online or WhatsApp-based sales.

How are lottery winnings taxed?

Lottery winnings in India attract income tax. All the lottery winnings are subject to a flat rate of 30% under Section 194B of the Income Tax Act, 1961, along with an additional cess of 4% on health and education. This makes the effective rate 31.2%. Big prizes can also entail a surcharge—10% if it is between Rs 50 lakh and Rs 1 crore, and 15% over Rs 1 crore. The winnings should be reported under "Income from Other Sources", and no exemptions or standard deductions are available. Tax deducted at source (TDS) preceded disbursement.

What happens to unclaimed lottery prizes?

Unclaimed lotteries usually remain with the state government after the stipulated period of claims, normally 30 to 90 days. Such funds are usually transferred to welfare schemes or the state lottery fund. For instance, in Kerala, the unclaimed prizes are deposited in the state lottery fund and utilised for education, health, and other social schemes. Likewise, Nagaland and Sikkim run popular lotteries such as "Dear Lottery” and make unclaimed prize amounts work for the public good.

What are the main criticisms against legalising lotteries?

Lotteries are said to exploit the poor, as they sell the false dream of easy money. This has resulted in cases of bankruptcy, loss of property and even suicide in the worst cases. For instance, in Himachal Pradesh, the reintroduction of the lottery was criticised by the Opposition leader from the BJP, Jai Ram Thakur, citing previous negative outcomes resulting in ruined families and accusing the government of taking the state down the same path again.

Are there restrictions on advertising lotteries?

Lottery advertising in India is regulated. The Advertising Standards Council of India (ASCI) Code does not allow advertisements that encourage gambling services such as lotteries unless approved by the state government. That is, state-run lotteries are allowed to advertise within their territory, but illegal or unauthorised lottery promotions are prohibited.

The code says advertisements for legally permitted lotteries must clearly disclose all material conditions so consumers can understand their chances, the timely announcement of results and proper prize distribution.

Additionally, large advertisement platforms such as Google and Meta ban lottery advertisements in India entirely, curbing the promotional scope of legal lottery providers.