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Why is lottery not allowed in India?

Lotteries have had a controversial history in India. While some states have permitted lottery games in the past, most forms of lottery are currently banned across the country. There are several reasons why lotteries face widespread restrictions and opposition in India.

History of Lotteries in India

During British rule, lotteries were quite popular as a means of raising revenue. The first lottery in India dates back to the 1700s when the British government started lottery games in Calcutta. Lotteries continued under British administration and were used to fund civic projects like town halls and road construction. The first modern government-run lottery was established in Kerala in 1967. In the decades that followed, many other Indian states also began operating their own lotteries legally.

However, concerns started arising about the harmful effects of lotteries. Critics argued that lottery games drained the savings of the poor, promoted social vices, and funded illegal activities through black market lottery networks. In the late 1990s, public interest litigations were filed challenging the validity of state-organized lotteries. This led to the banning of lotteries in many states. In 1998, the central government enacted the Lotteries (Regulation) Act which prohibited the sale of other states’ lotteries and restricted lotteries to only those states that chose to permit them. Currently, only 13 states allow lottery games under this law.

Reasons for Lottery Ban

There are several economic, social, and moral factors behind the largely anti-lottery public opinion that has driven the bans in most parts of the country:

  • Lotteries are seen as a form of gambling, which is equated to a social vice.
  • Lotteries are considered exploitative money-making operations that disproportionately take money from the poor sections of society.
  • Studies have shown that poorer households spend a greater portion of their income on lottery tickets, highlighting its regressive nature.
  • Lottery games are believed to fuel petty crimes as people may resort to robbery, theft, and fraud to finance lottery ticket habits.
  • Money spent on buying lottery tickets is seen as unproductive expenditure that does not contribute to the economy or society.
  • Lotteries can lead to addiction-related issues for some individuals who get habituated to the lure of easy money.
  • There are risks of lottery activities being used to launder black money and fund illegal activities like terrorism.
  • Allowing lotteries may go against cultural values and religious principles of some communities about earning money without effort.

Essentially, lotteries are perceived as encouraging idle speculation instead of productive economic activity. There are also concerns regarding their transparency and the potential exploitation of vulnerable sections of the population. These factors have turned public opinion against allowing lottery operations across most parts of the country.

Arguments in Favor of Lotteries

While there are valid grounds for apprehensions about permitting lotteries, some counterarguments are made in favor of allowing regulated lottery games:

  • Banning lotteries simply drives the activity underground, fueling unregulated and illegal lottery schemes.
  • Legal, state-monitored lotteries are a transparent source of public revenue.
  • Lotteries provide a relatively harmless recreational activity and a form of affordable entertainment for all classes.
  • Proceeds from lottery sales can be used to fund public welfare activities in fields like healthcare, education etc.
  • Lotteries offer a glimmer of hope for a chance to win a fortune even to the economically marginalized.
  • Since the chances of winning are extremely slim, lotteries may not necessarily cause financial ruin.
  • Regulated lotteries can implement responsible gambling practices and educate people on risks.

However, so far these arguments have not overridden the more widespread view that the adverse repercussions outweigh the benefits of legalizing lottery games.

Current Legal Status of Lotteries in India

The Public Gambling Act of 1867 specifically prohibits private lotteries and the running of a lottery office. State-run lotteries are exempted from this blanket ban. The Lotteries (Regulation) Act, 1998 allows state governments to organize, conduct, or promote a lottery, provided they impose strict regulations. The Central Government also collects tax revenue from state lotteries. Currently, the following states permit regulated lottery schemes:

  • Kerala
  • Punjab
  • West Bengal
  • Goa
  • Maharashtra
  • Sikkim
  • Nagaland
  • Arunachal Pradesh
  • Manipur
  • Meghalaya
  • Mizoram

Some other forms of gambling like horse racing and rummy are permitted but regulated. However, most other lottery models like online lotteries, national lotteries, private lotteries etc. remain prohibited as per the Public Gambling Act.

Key Legislations on Lotteries in India

The legal framework around lotteries in India consists of the following key acts and regulations:

Legislation Key Points
Public Gambling Act, 1867 Broadly bans public gambling activities and common gaming houses.
Lotteries (Regulation) Act, 1998 Allows state-run lotteries under regulation. Prohibits other lotteries.
Indian Contract Act, 1872 Defines lottery tickets as agreements that the law will not enforce.
Income Tax Act, 1961 Imposes income tax on lottery winnings.
State Acts Individual states frame rules to regulate lotteries within their jurisdiction.

These laws impose several restrictions and regulations on lottery activities permitted within states. For instance, Kerala’s lottery department controls and monitors lottery games under the Kerala Government Lotteries Rules, 1986. The Lottery (Regulation) Rules, 2010 of Sikkim regulate aspects like draws, ticket pricing, prizes, retailer commissions etc.

Regulatory Bodies for Lotteries

At the central level, lotteries are administered by the Department of Revenue under the Ministry of Finance. The Lotteries Division of the Department oversees the Lotteries (Regulation) Act, 1998. It coordinates with State Governments on aspects like taxation of lotteries.

Within states where lotteries are legal, regulatory bodies are constituted to manage lottery activities. Some examples are:

  • Kerala State Lotteries – Kerala State Lottery Department
  • Punjab State Lotteries – Punjab State Lottery Department
  • Mizoram State Lotteries – Mizoram Lottery Department
  • Sikkim State Lotteries – Sikkim Lottery Department

These administrative bodies formulate rules on aspects like game formats, draws, ticket pricing, claiming of prizes, retailer commissions, etc. to regulate lottery operations in their respective states.

Taxation of Lottery Winnings

Lottery winnings above a specified threshold amount are subject to income tax deductions under the Income Tax Act, 1961. Some key points on lottery taxation are:

  • Winnings from state-run lotteries are taxable above Rs 10,000.
  • For winnings from other lotteries (horse racing, card games etc), the threshold is Rs 5,000.
  • An additional surcharge and health & education cess is also applied on the tax amount.
  • Tax is deducted at source (TDS) on winnings above these thresholds.
  • The lottery promoter or agent deducts TDS before handing over the prize money.

The taxability serves as an additional source of revenue for the government from lottery operations. It also aims to put an indirect check on excessive participation in lottery games.

Social Impact of Lotteries in India

Lotteries have had various socio-economic repercussions that have fueled opposition to their legalization in India:

  • Studies show poorer households form a major share of buyers of lottery tickets, highlighting its regressive nature.
  • Compulsive gambling disorders have been observed especially among the youth and economically vulnerable populace.
  • Indebtedness induced by lotteries has been reported among low-income communities.
  • Lotteries have been associated with elevated crime rates in some research.
  • School drop-out rates have been found to be higher in regions with rampant lottery participation.
  • Funds diversion from productive economic activities towards lottery spending has been a point of concern.

However, lottery proponents argue that banning rather than regulating lotteries gives rise to unregulated black market lottery schemes. The economic benefits of legalized lotteries are also cited by supporters.

Notable Controversies Related to Lotteries in India

State-run lotteries have been embroiled in various controversies over the years:

  • Kerala lottery scam (2003) – Misappropriation of funds and tampering of lottery draw results was detected in the Kerala State Lotteries. Multiple arrests were made including high-ranking officials.
  • Mizoram lottery scam (2019) – Large scale financial irregularities were reported in the Mizoram state lottery. The lottery director and distributors were arrested on graft charges.
  • Nagaland lottery ban (2019-20) – Lotteries from Nagaland were banned in a few states due to concerns of misuse for money laundering and flouting of laws. The ban was eventually lifted in 2020.
  • Lottery corruption cases – Repeated incidents have surfaced over the years of lottery agents and officials colluding in fraudulent activities involving prize money distribution.

These incidents have added fuel to the anti-lottery perspective that legal lotteries are prone to malpractices due to vested interests and poor monitoring.

Perspective on Banning Lotteries

While blanket bans on lotteries are still opposed in some quarters, the general public opinion appears to be aligned against allowing lottery operations. Sociologists point to the wider attitudes in Indian society that frown on easy money through gambling and speculative activities. The disapproval is grounded in beliefs that lotteries promote social vices and disproportionately drain resources from the lower income classes. Concerns of fraud and exploitation in lottery operations have also eroded their public trust over time. While regulated lotteries have been experimented with earlier, the experience has been discouraging overall. Hence, there is little appetite currently among policymakers to advocate for a countrywide reversal of the lottery ban despite revenue considerations.


Lotteries have had a chequered history in independent India. Starting with optimism as revenue sources for states, over time their image has suffered considerably. The adverse socio-economic externalities highlighted by studies have shifted public opinion decisively against lotteries. Currently, apart from in a handful of states, lotteries remain prohibited across the country through central and state legislations. While their legal status may continue to be debated, a full nationwide legalization appears unlikely given the prevailing societal mores against gambling activities. The state too derives moral justification from restricting lotteries. However, concerns remain of driving lottery activities underground into unregulated and exploitative channels. As issues like responsible gambling and transparent digital lotteries gain more global prominence, India may also need to reassess any dogmas around state lotteries. But for now, moral and social considerations seem to outweigh economic motivations when it comes to permitting lottery operations across most parts of the country.