Betting or gambling is illegal in most of India. But there is no law that makes online betting an illegal activity. Surveys conducted in 2020 have revealed that there are approximately 300 million online gamers in India and the number is going to increase rapidly in coming years. With widespread use of internet casinos companies have started casino websites offering an enthralling environment to play in. There is much litigation on gambling but income tax does not restrict anyone to earn from litigated source. It only says “Please Pay Tax”. Therefore online gambling is also taxable.
RATE OF TAX
Income from gambling is taxable under head Income from Other sources and is taxed at flat rate of 30%+ 4% Cess i.e. 31.2%. Gambler is not allowed minimum exemption limit of 2.5lakhs available to other assessee.
TDS ON PRICE MONEY RECEIVED
If the Prize money exceeds Rs 10,000, then the winner will receive the prize money after the deduction of TDS @31.2% u/s 194B.It does not matter whether the income of the winner is taxable or not. The prize distributor is liable to deduct tax at the time of payment which will be displayed in Form-26AS. The gambler can take credit of TDS while filing return of income.
ON WHICH AMOUNT TAX IS REQUIRED TO BE PAID
Tax is required to be paid on winnings amount. It is not required to be paid on amount of transactions entered. For Eg: Mr. Anish plays online casinos and has done transaction of 1crore but has earned only 10 lacs. Therefore tax is required to be paid on 10lacs and not 1 crores.
DEDUCTIONS OR EXPENDITURE NOT ALLOWED
No deductions or expenditure incurred to earn income from gambling is allowed. The winnings are taxable at Flat rate of 30% + applicable Surcharge and Cess.
WHEN WININGS ARE IN KIND
Suppose Mr. Anish wins a Car from Gambling or betting then prize distributor has to make sure that TDS has been paid deducted on the basis of market value of Car before handling the Car to Mr. Anish. The tax burden can be beard either by Prize Distributor or Mr. Anish.
WHEN WINNINGS ARE PARTLY IN CASH AND PARTLY IN KIND
In cases where prize is given both in cash and kind, then the total tax should be calculated on the cash portion of the prize and on market value of the prize given in kind. And the tax amount should be deducted while giving the cash portion of the prize to the winner. But if the cash prize is not sufficient to cover the total tax liability, then either the winner or prize distributor should pay the deficit.
OUR COMMENT
If you gamble in online casinos, please make sure that you file return of income.
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The above comments do not constitute professional advice. The Author can be reached at [email protected] or visit website www.financialtreecompany.com. My name is CA Divya Agrawal and I am Practising Chartered Accountant, CEO and Founder of FINANCIAL TREE COMPANY (An online return filing and Tax Consultancy Company). We also upload educational videos in You tube and name of our channel is FINANCIAL TREE COMPANY. Our aim is to help people in improving their financial health by spreading knowledge and love. Stay Financially Fit and Healthy.
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What if I have lose money more than winning, do I need to pay tax on the winning or not?
Suppose, I have betted on first time 1 lac and I lost it, then again I bet 50 thousand and I won 70 thousand, hence I am still 30 thousand on loss side.. then do I need to pay tax or not??
You have to pay tax on wining amount. Loss is not allowed to be set off against winings.