Laws Relating To Lottery In India

– Shreya Pahwa


The term lottery is derived from the Dutch word ‘lot’ meaning ‘fate’. It may be defined as a game of chance which includes draw of lots for a prize. It is considered a form of gambling from the very beginning. Some people earn by selling lottery tickets, others by buying it in a hope to win. This in turn helps the government in generating funds. On the other hand, it is considered an ill habit because people get addicted to it and end up losing their hard-earned money. As an outcome of this, their entire household falls victim to it and has to bear the sufferings.


In the case of State of Sikkim v State of Kerala, the Division Bench comprising Justice CK Abdul Rahim and Justice TV Anil Kumar at the Kerala High Court declared the Kerala Tax on Paper Lotteries Act unconstitutional on 30th April 2020. It was held that the state is incompetent to levy tax on state lotteries under the impugned legislation.

One of the major issues raised was a conflict between two entries of the Seventh Schedule viz., Entry 40 of List I & Entry 34 of List II. ‘Lotteries organized by the Government of India or Government of a State’ is covered under Entry 40 of List I which is in the legislative competence of the Parliament. Pursuant to the powers, the Parliament enacted the Lotteries (Regulation) Act, 1998 but did not provide for any tax on lotteries, including paper lotteries. The government of Kerala under the Kerala Paper Lotteries Act, 2005 imposed a licence fee on the draw of lotteries under Section 5BA of KGST[1] Act. It was the validity of Section 5BA which was challenged before the Kerala High Court. Such an imposition is prohibited by law as the subject is not within the legislative competence of the State.

It was contended that the conduct of lottery undoubtedly falls within the purview of the general subject ‘Betting and gambling’ which is entailed in Entry 34 of List II but this head does not include the state organised lotteries. Hence, the state legislature was not in the capacity to impose tax on lotteries and the subject is within the exclusive legislative competence of the Parliament. It was thus held that the impugned legislation is unconstitutional and invalid.


A couple of years ago, the Supreme Court of India refused to recognise the Right to sell lottery as a fundamental right and  authorized all state governments to take decisions for their respective states regarding the sale of lottery. Many of the state governments have banned the practice but these bans are not fully implemented as lotteries still function on online platforms. Presently, the following 13 states still consider lotteries a legal practice viz., Assam, Goa, Kerala, Maharashtra, Punjab, Sikkim, West Bengal, Nagaland, Manipur and Meghalaya. The minimum age requirement for the purpose of either purchase or gifting of a ticket is 18 years. Buying of lottery is a common practice in these states but the social activists are struggling to make people aware of this addiction so that they do not land in financial trouble.

The state governments use these state lotteries as a way to earn revenue for the government. The lotteries work in a in a just manner by virtue of the rules laid down by the government. In accordance with Section 4 of the Lotteries Regulation Act, 1998, the states are allowed to organise, conduct or promote a lottery subject to the following 11 conditions[2]

  1. prizes shall not be offered on any pre-announced number or on the basis of a single digit;
  2. the State Government shall print the lottery tickets bearing the imprint and logo of the State in such manner that the authenticity of the lottery ticket is ensured;
  3. the State Government shall sell the tickets either itself or through distributors or selling agents;
  4. the proceeds of the sale of lottery tickets shall be credited into the public account of the State;
  5. the State Government itself shall conduct the draws of all the lotteries;
  6. the prize money unclaimed within such time as may be prescribed by the State Government or not otherwise distributed, shall become the property of that Government;
  7. the place of draw shall be located within the State concerned;
  8. no lottery shall have more than one draw in a week;
  9. the draws of all kinds of lotteries shall be conducted between such period of the day as may be prescribed by the State Government;
  10. the number of bumper draws of a lottery shall not be more than six in a calendar year;
  11. such other conditions as may be prescribed by the Central Government.


The Central government launched two prize schemes or lucky draw schemes- Lucky Grahak Yojana and  Digi-Dhan Vyapar Yojana. These became operational on 25th December, 2016. Both these schemes were introduced in an effort to guide India towards being a cashless society. It gave cash rewards to people who used digital payment instruments for personal consumption expenditures. But these schemes by NPCI came up against the following statutes-

  • Lotteries(Regulation) Act, 1998
  • Consumer Protection Act, 1986
  • Tamil Nadu Prize Scheme (Prohibition) Act, 1979

In this regard, NITI Aayog clarified that any lucky draw which is organised to promote digital transactions do not come under the purview of Section 2(b) of the Lotteries Regulation Act which defines lottery as “a scheme, in whatever form and by whatever name called, for distribution of prizes by lot or chance to those persons participating in the chances of a prize by purchasing tickets.[3]”It also stated that the schemes are not in contravention of  Section 2(1)(r) of the Consumer Protection Act which prohibits any sort of unfair  trade practice including “ lotteries or contests whether of skill or of chance to promote the sale, use or supply of goods or for the provision of any service adopting any sort of unfair means[4]” For these kinds of lucky draws the customer pays nothing and gets small rewards as cashback.

The Parliament promulgated the Lotteries (Regulation) Act, 1998 with the object to provide for matters relating to the regulation of lotteries. Further, on April 1, 2010, the Lotteries (Regulation) Rules was enacted concerning number of tickets sold, tickets which remain unsold, amount of prize or prizes, etc.

The laws may differ from state to state but there are some ground rules which includes Section 30 of the Indian Contract Act. It states that agreements by way of wager are void i.e., agreements where there are mutual chances of winning or losing an uncertain event are void. No suit can be brought before the Court for recovering anything which is won on any wager. In simpler terms, it is legal to buy a lottery ticket but the winner has no right to claim the winnings if the agency refuses to pay him.

Some states have their own legislations regarding lottery-

  • Sikkim Casino Games Act, 2004
  • The Goa, Daman and Diu Public Gambling Act, 1976
  • The Nagaland Prohibition of Gambling and Promotion and Regulation of Online Games of Skill Act, 2015.


Entry 40, List I of the 7th Schedule states that the Parliament has the power to make laws pertaining to lotteries organised by the Government of India or Government of any State. Similarly, when it comes to State lotteries, the State Legislature has the power to make laws related to betting and gambling under Entry 34 of List II. Entry 62 of List II entails that State Legislature is competent to make laws imposing taxes on luxuries including betting and gambling.

Besides this, Article 19(1)(g) of the Constitution of India protects the right of citizens to practice any profession, or to carry on any trade or business provided the State can impose reasonable restrictions in public interest under clause (6). Part XII( Article 301- Article 307) of the Constitution is also related to this subject which sets out provisions for trade, commerce and intercourse within the territory of India.

Gambling is always looked down upon as an immoral act. It is an offence under Section 294A of the Indian Penal Code, 1860. This section specifically prohibits private lotteries and if anybody is found keeping any office or place for the purpose of drawing non-state lotteries shall be punished for a term which may extend to six months, or with fine, or with both.

  • Can a lottery meet the status of trade or occupation to claim protection under Articles 19(1)(g) and 301?
  • What are the social implications of lotteries?

The following precedents are in the above context.

  • In R.M.D. Chamarbaugwalla  v. Union of India, a five Judge bench held that lotteries do not qualify to come under the head ‘trade or occupation’ so it is not protected under Article 19(1)(g) or 301. The restrictions imposed under Article 19(6) are reasonable and no appeal lies against it in the Court of law.
  • In B.R. Enterprises v. State of U.P, a division bench relied on the ruling of R.M.D.C case. Justice Misra stated that there is no difference between a lottery organized by a State under law made by the Parliament and a lottery organized by a private party under a State law. He ruled that both have the same characteristics and selling of either cannot be claimed as a fundamental right or a right under Article 301.


Lotteries are often depicted as a means of generating revenue which serves the public in return. But the harsh reality is, the funds are often from the plates of the gambler’s family members. People get addicted to the practice of buying lottery tickets in a hope that they will win some day and lead an easy life. Hence, many states have banned lotteries as social costs of it are higher.


There is no nationwide ban on lotteries but only the abovementioned 13 states permit it. These states have the power to regulate lotteries only in their jurisdiction while the rest of the states have banned the practice but do not have any authority to stop people from participating in international lotteries. Since the draw does not take place in India, international lotteries are not illegal. Hence the public can easily try their luck at winning.

The ban on lotteries in India is inefficacious as most of the trade still continues in the form of legal online lotteries. Thus, the trade is still on but the government gets no revenue. Alongside, there are a number of illegal online lotteries which are operated anonymously. Despite being banned, lotteries still hit the market and people consider it to be an easy way of earning money. Participation in online international lotteries is governed in India by FEMA[5].  Section 5 of the Act states ‘Any person may sell or draw foreign exchange to or from an authorised person if such sale or drawal is a current account transaction[6]’ including remittance out of winning lotteries, remittance for purchase of lottery tickets.


A complete ban on lotteries is impossible in our country and those who are addicted would find a way come rain or shine. So, instead of giving away money to other countries by participating in international lotteries, it would be better that people give it to their government. It would help in fetching more revenue to the government and in return, people might get some benefits out of it. As per the government, any profit arising out of lotteries is used for developmental activities and social welfare. In Kerala, nearly 3 lakh people earn their livelihood by selling lottery tickets so banning lotteries completely would lead to  chronic unemployment and will affect the society adversely. Hence, bringing an end to online lotteries would serve the purpose.

Shreya Pahwa

Final year student at Amity Law School,

Amity University, Noida

[1] Kerala General Sales Tax Act, 1963




[5] Foreign Exchange Management Act, 1999


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