We all are aware of India’s success story at the Tokyo Olympic Games 2020. Whether it’s Neeraj Chopra’s gold or Mirabai Chanu’s silver or even our women hockey team’s missed medal from a strikingly close distance, they all have made the whole country proud. In fact, their victories have fuelled the motivation of our younger generation to opt for sports as a career. This helps create a sporting culture in the country.
In the days following their glorious feats, we saw rewards and prizes being awarded to the medal winners and other participants for their great achievements as a token of respect, recognition, and encouragement. Both Central and State Governments, as well as corporate organizations and global brands, have announced handsome rewards, which have caught the fancy of the entire country and made these medal winners and other Olympians national heroes.
While celebrating the announcements of these rewards, it has also generated the interest of the general public to know about the tax liability in the hands of the sportspersons in respect of the rewards received by them, both in cash and kind under the Income-tax Act, 1961. Through this article, the author has attempted to address the curiosity regarding the taxability of cash and other rewards given to medal and non-medal winners in our country. The same can be understood in two parts-
1. Medal winners at Olympics; and
2. Non-medal winners at Olympics and other competitions/ tournaments
Medal winners at Olympics
The Income-tax Act specifically exempts the rewards given by the Central Government and State Governments to the medal winners at Olympics Games, Asian Games, and Commonwealth Games u/s 10(17A) of the Act[1]. So, the Central Government and various State Governments like Haryana, Rajasthan, etc., announcing cash prizes worth crores of rupees to the medal winners like Mirabai Chanu, Neeraj Chopra, etc. gets covered under the exemption clause of the Income-tax Act, with the full income-tax exemption. Thus, the entire cash prize, including the prizes rewarded in kind shall not be taxable in the hands of these sportspersons.
Non-medal winners in Olympics and other sports
The Income-tax exemption, discussed above, is limited to the rewards granted by the Central and State Governments to the medal winners only. Meaning thereby, that any reward announced by any other body or organizations like private sponsors, local bodies, or commercial brands shall be taxable. This shall also cover the case of our women’s hockey team which, despite no medals, is being rewarded for its outstanding performance at the games as a mark of encouragement. The rewards received by the members of the women’s hockey team shall be taxable as per the Income-tax Act.
For understanding the taxability of sportspersons falling under this category, we need to analyze if the sportsperson is an amateur/non-professional or a professional sportsperson. An amateur or a non-professional sportsperson is one who plays the sport not under his name but under the name of and as a representative of the country. Whereas a person who plays the sport under his own name and charges a fee for participation in the sports event/ competition is a professional sportsperson.
For an amateur/non-professional sportsperson, income in the form of rewards shall be regarded as gifts taxable under the Income-tax Act[2]. So, for cash rewards or cash gifts exceeding Rs. 50,000 or rewards in the form of gifting of immovable property like a plot of land etc. the same shall be taxable with regular tax benefits. Rewards in the form of other properties like paintings, jewelry, etc. shall also be taxable. One interesting point to note here is that, on giving rewards in the form of a car, the same shall not be taxable as a car is not included in the list of other properties[3]. So, the XUV 700 received as a reward by Neeraj Chopra from Anand Mahindra may be saved from taxation.
Now, in the case of professional sportspersons, such rewards shall represent benefits derived by them on the exercise of their profession. The same shall thus be taxed as his or her professional income under the Income-tax Act[4]. So, the reward received by Virat Kohli post-IPL shall be covered under this clause and the same shall be taxable in his hands. One may wonder, then what is the difference between taxation for amateur and professional sportspersons. The difference lies in the treatment of income for tax purposes i.e., for amateurs, income from rewards will be treated as ‘income from other sources while for professionals, income from rewards will be treated as ‘income from business or profession’ which has a different tax treatment under the Income-tax Act.
The author is, however, of the opinion that rewards are given to all Olympic Games participants, irrespective of being a medal winner should be tax-free under the Income-tax Act so that our much deserving sporting heroes like women hockey team members, who missed getting a medal, could stay motivated. If the Government wishes to promote sports as a means of livelihood, it may even come up with a special tax exemption notification in favor of our sporting icons
[1] Order [F. NO. 199/03/2013-ITA.1], Dated 28-1-2014
[2] Section 56(2)(x) of the Income-tax Act, 1961
[3] As per the explanation to Section 56(2) “property” means the following capital asset of the assessee, namely:—
(i) immovable property being land or building or both
(ii) shares and securities
(iii) jewelry
(iv) archaeological collections
(v) drawings
(vi) paintings
(vii) sculptures
(viii) any work of art
(ix) bullion
[4] Section 28 of the Income-tax Act, 1961
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