Balwant Jain

The Olympic medal winners are now enjoying and having the time of their lives; a well deserved reward for their perseverance and hard work. Not only the award winner players, but also the not so lucky players and their coaches have also been bestowed with lots of rewards and love by the fellow countrymen. With people like you and me adding up the reward money received by these players, being a tax freak, I decided to check on the taxability of the various rewards received by these people.

Exemption Provisions

Section 10(17A) of the Income Tax Act, authorises the Central Board Of Direct Taxes (CBDT) to approve some specific payments, made by the Central and State Governments as exempt from payment of taxes, which are of public interest. Though these provisions were introduced in 1974, the CBDT passed an order as late as 28-01-2014 making such reward in cash or kind received by any medal winner in Olympic Games, Common Wealth Games and Asian Games exempt.

So, the rewards received by Mr Abhinav Bindra for the gold medal won in 2008 Olympic,  a sole gold medal till date won by any individual,  were taxable but the award money received by  the medal winners after 28-01-2014 are fully tax exempt.

What is exempt and what is not

Section 10(17A) authorises the CBDT to exempt only the rewards given either by the Central Government or a State Government from payment of taxes. However, any reward whether in cash or in kind given by anybody else like a local authority, sports authority or an industrial house does not enjoy the exemption and is fully taxable. It effectively reduces the prize money received by them in hand. For example, the reward of BMW by the Hyderabad-based businessman Chamundeshwarnat does not fall into the category of the rewards either by the Central Government or State Government (exempt), so the recipients of the BMW will have to offer the case value of it for taxation. The reward money given by any State Government to the Olympic medal winner is exempt and not only the State Government in which the medal winner is residing. So, the reward money given by Andhra Government as well as the Telengana Government to P V Sindhu is fully exempt in her hand.

For whom it is exempt and for whom it is taxable

The CBDT order categorically states that the reward money of the medal winner only is exempt. Dipa Karmarkar who stood 4th by performing the Produnova Vault did not win a medal. Thus, she is not entitled to the tax exemption on the reward of Rs. 50 lacs by Telengana State Government which is available to Sakshi Malik (Rs. 1 Crore)  and P V Sindhu (5 Crores) awarded by the same State Government.

Likewise, the reward money received by Mr. Gopichand Pullela, coach of P V Sindhu is fully taxable in his hands as he himself did win a medal in Olympic Games.

I am sure this article has satisfied your curiosity of knowing about the tax treatment of the reward money for the Olympians.

(The author is a CA, CS and CFP. Presently working as Company Secretary of Bombay Oxygen Corporation Limited. Views are personal., He can be reached at jainbalwant@gmail.com and @jainbalwant)

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  • Gopi kancharla

    Can olympic winner shift tax liability to the person giving reward (By other than central and state govt) ?

    • Balwant Jain

      I do not think this is possible but the person giving the reward may decide to bear the tax burden by grossing up the reward amount.

  • GANDHI MOHAN BHARATI

    I hope at least the BJP Government will look into this.
    I doubt it because of my innumearable letters to Defence Minister, Finance Minister & also to the PMO toatleast exempt Serving Soldiers who are fighting for us in J&K and East and at hard places like Siachen and Submarines to be exempted from the last date due for filing Income Tax Retubns have fell onto deaf ears. Even Chiefs of Services are least bothered. They only pay lip sympatyhy at a time of Martyr.
    Even if Ministers tell the bureaucrats to do the needful, these officials do not pay the much needed meticulous details.
    I think that everyone who enters Goverment Service must be posted for 6 months in Siachen & for 6 six months in Anti – Insurgency Operatin.

  • S.Ramachandran

    In Shri Abhinav Bindra’s case the awards received were held not taxable. Please see Shri Abhinav Bindra v DCIT before the ITAT, Delhi Bench “A” in ITA NO 2219/Del/2013. Please also see CBDT Circular No. 447 dt 22.01.1986

  • Balwant Jain

    I do not think this is possible but the person giving the reward may decide to bear the tax burden by grossing up the reward amount.

  • Balwant Jain

    I am aware of the Bindra case before Delhi Tribunal. However as the circular specifically exempting the rewards received from Central government and State government is issued only on 28-01-2014 I stand by what I have written.

    Moreover as Section 56(2) covers residual items and since CBDT can not go beyond the provisions of the Income Tax Act, the position of law as per income tax act is what is stated by me in the above article.

    However in case you are willing to take risk and litigate you may get relief at later stages. .

    It is not necessary that other Tribunals will follow the Delhi Tribunal Decisions and the income tax department will not appeal against the tribunal decision even if the Tribunal follows the decisions of Delhit Tribunal.