Introduction: The IPL mini-auction 2024 witnessed Australian cricket stars Mitchell Starc and Pat Cummins securing a hefty combined sum of Rs. 45.25 crores. As non-resident, non-citizen athletes, their substantial earnings prompt a closer look at the tax implications under Section 115BBA of the Income Tax Act, 1961.
In this case, both are Australian World Cup winning players. Both didn’t play last season, now were involved in major cash burn at the mini-auction, inviting bids from many of the teams.
One interesting question arises here, what about their taxability on income?
For them, there is a special provision by virtue of Section 115BBA of the Income Tax Act, 1961.
As per the Section 115BBA of the Act, where the total income of the assessee, being a sportsman (including an athlete), who is not a citizen of India and is a non-resident, includes any income received or receivable by way of
(a) participation in India in any game (does not include winnings from lottery) or sport.
(b) advertisement
(c) contribution of articles relating to any game or sport in India in newspapers, magazines or journals
The income tax payable by the assessee shall be at aggregate of the amount of income-tax calculated on income referred to in (a) or (b) or © at the rate of twenty percent.
Provided that no deduction in respect of any expenditure or allowance shall be allowed under any provision of this Act in computing the income
It shall not be necessary for the assessee to furnish return u/s 139(1) if his income consists of only the above income and the TDS has been deducted u/s 194E.
In the hands of Cummins and Starc
In this case, both Starc and Cummins are sportsperson who are not citizen of India and non resident as per Income Tax Act.
So, the auction proceeds of Rs. 45.25 crores is taxed at the rate of 20% in the hands of both the players. For which they can’t claim any expenditure since they are being professionals.
Also, they’re exempt from filing Return of Income only if his income is on account of participation in India and the franchisee has deducted TDS at the rate of 20% u/s 194E of the Act.
In the hands of franchisee
The franchisee (SRH and KKR) has to deduct TDS u/s 194E at the rate of 20% and submit Form 15CA with reference to certificate by Chartered Accountant in Form 15CB intimating the payment details to the Income Tax Department.
Considering from Australian Taxation prespective
Income earned in India by both cricketers being resident of Australia though paid personal tax in India forms part of total income which is ultimately taxed in Australia.
The same concept of resident’s global income is taxed in resident country is also present in the Indian Tax Law.
To avoid double taxation on same income and fiscal evasion, many countries have entered into Double Taxation Avoidance Agreement (known as ‘DTAA’) from offering benefits such as foreign tax credit claim, lower tax deductions etc.
Both India and Australia have entered into DTAA agreement to avoid double taxation on same income.
The DTAA between countries has been segregated based on Articles. In our scenario, the relevant article is Article 17 (Entertainers) which has to be mentioned in Form 15CB ( Certificate by Chartered Accountant)
As per Article 17(1) of DTAA between India and Australia, ‘Income derived by residents of one contracting states (Australia) as entertainers, such as theatre, motion picture, radio or television artists, musicians and athletes, from their personal activities as such exercised in other contracting state (India), may be taxed in the other state (India).
In this case, since their income has been taxed in India, the income earned in India forms part of income as per Australian Tax laws, but they can claim credit on income earned from IPL contracts are subject to additional restrictions as per Australian law if any.
Conclusion: In conclusion, Mitchell Starc and Pat Cummins face a 20% tax rate on their IPL earnings under Section 115BBA. The franchisors must adhere to TDS requirements, and the DTAA between India and Australia ensures a fair tax treatment, avoiding double taxation. Understanding these tax intricacies is crucial for both players and franchises involved in cross-border sports transactions.
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