Neeraj Chopra created history by becoming the first-ever Indian to win a gold medal in athletics in the history of the Olympics and it is raining praises and prizes for him. Other winners of silver and bronze have also been bestowed with pat on the back and money in the hand. While the players have become rightfully richer, people like you and me are summing up the reward money awarded to these players. Being a tax freak, I thought of checking on the taxability of the rewards received by all these players.
Are such prizes whether in cash or in kind tax free?
Section 10(17A) of the Income Tax Act, authorises the Central Board of Direct Taxes (CBDT) to declare certain rewards as tax free given by the Central and State Governments in public interest. Though this provision has been there in the law book since 01-04-89 but CBDT as late as on 28-01-2014 passed an order making reward in cash or kind received by any medal winner in Olympic Games, Common Wealth Games and Asian Games tax free.
Section 10 (17A) of the Income Tax Act provides for exemption in respect of rewards given only by the Central Government and State Governments tax exempt in the hands of the players. It does not make the prizes announced by other authorities like a local authority, sports authority or an industrial house etc. tax exempt. So the prizes like an SUV announced by Mr. Mahindra for Neeraj Chopra does not come tax free in his hand and he will have to shelve out 30% from his own pocket unless Mr. Mahindra is generous enough to fund the tax also in respect of value of the SUV.
It is interesting that the reward money given by any State Government to the Olympic medal winner is exempt and not only from the State Government in which the medal winner belongs. So, not only the reward money of Rs. 6 Crores announced by Haryana government but also reward of 2 Crores announced by Punjab Government and 1 crore by Manipur government to Mr. Neeraj Chopra would be fully exempt in his hands.
For whom it is exempt and for whom it is taxable
The CBDT order categorically states that the reward money to the medal winner only is exempt. So the prize of Rs. 50 lakhs to the 9 players of Indian women’s hockey team from Haryana announced by the Haryana Government will not be tax free in their hands as they are not the winner of any medal. Likewise, the reward money if any received by coach of these players even announced by any government will not be tax free in their hands.
Tax rates and deduction of tax at source
The award money which is does not enjoy the tax exemption as explained above will have to pay tax at flat rate of 30%. The payer of the prize money in cash is required to deduct tax at 30% at source. In case of prize in kind either the player will have to pay the TDS amount to the person giving the prize in kind. Alternatively the giver of the prize in kind can gross up so prize money so that the player does not have to shelve tax from his pocket.
I am sure this article has satisfied your quench of thirst of knowing about the tax treatment of the reward money for the Olympians.
Balwant Jain is a tax and investment expert and can be reached on [email protected] and @jainbalwant his twitter handle.
(Republished with Amendments)