Do You Need to Pay Tax on Your Winnings in India?
If you’ve been playing at online casinos for a while now, I’m sure you might have asked this question to someone or at least, searched on Google – Do you need to pay tax on your winnings in India?
Before I give you an answer, let me ask you – do you believe gambling is legal? If so, you could be right and wrong. The legal framework of gambling in India is mostly garbled and incoherent. Since it’s open to interpretation, you and I can assume it’s legal including the part where you keep your rewards.
However, that’s where the cache is. If you gamble and win rewards above ₹10,000, it’s taxable at a flat 30%. The rule also makes it clear that the income from gambling isn’t eligible for deductions whether 80C or 80D.
Wondering what sources qualify as gambling income? Due to the lack of clear definition, the income from lotteries, race track, and game shows in addition to casinos and card games are considered gambling income.
Can I Claim Deductions from my Winnings?
According to the existing laws, you can’t claim any deductions on what you earn from the game of probability or a game of skill. The 31.2% tax is applicable to earnings from betting and gambling of any nature whatsoever.
For instance, if you win 4 lakh rupees from a game show, and have an interest income of 6 lakh per annum, your tax liability will be calculated like this:
- ₹3 lakh will attract a tax liability of 31.2%.
- ₹6 lakh will be taxed as per your income tax slab
Under the Income Tax rules in India, it’s punishable to conceal any income from betting or other sources of income. It can attract stiff penalties or jail terms or both.
The government is pushing for transparency in gambling by enforcing cashless transactions. There was also a recommendation to link the PAN/Aadhar card of casino players with gambling transactions to prevent money laundering. An active effort is taken by the government in this area.
Which Games have Rewards that attract Gambling Tax?
30% tax is applicable to you by winning any of these games:
- Horse racing
- Crossword puzzles
- Cricket Betting
- Television Game Shows
- Lucky Draw
Who Regulates Betting in Your Jurisdiction?
As you can see, existing laws are somewhat unclear and let me explain a few instances to help you understand who regulates betting in your jurisdiction.
In the case of slot machines and table games in casinos, your State is the regulating body. Under Gaming Enactments, casino games are prohibited in most Indian states although the law isn’t very clear on the matter.
However, gambling laws in Goa, Sikkim, and Daman & Diu are wholly regulated by respective State authorities under the “Sikkim Casino Act” and “Goa Act.”
In most circumstances, these laws aren’t enforced at the player level.
- In Sikkim, online and land-based casinos are regulated with a licensing scheme where the license covers Blackjack, Roulette, and Casino Brag.
- Meanwhile, the Director of Tourism regulates slot machines and online gambling across Daman and Diu.
- In Goa, the Home department is the regulating authority for land-based and online casino games.
- Poker is unregulated in most places across India because players can argue it’s a game of skill and not a game of chance. Therefore, it’s exempted from Gaming Enactments. According to Nagaland Act, it’s the only State with a licensing authority recognizing Poker as a game of skill.
- Gaming Enactment is applicable to ‘Bingo’ because it’s classified as a lottery game. Since it’s a game of chance, it’s prohibited in nearly all states across India.
- Betting, in general, is considered a game of chance. It’s therefore subject to a blanket ban in India. However, due to certain distinctions between casino betting and sports betting, the rules vary in different States.
- Horse racing is a form of betting that’s considered a game of skill. The State government is the licensing body that regulates Turf Clubs. Due to a lack of proper definitions, the question of whether sports betting is a game of chance or not is tabled in the Supreme Court of India for judgment.
- In the case of Fantasy betting, it’s not entirely prohibited under Gaming Enactments. Certain skill formats are still permitted in Nagaland. Such formats of betting are operated under a license.
- In India, lotteries are banned with certain states being an exception because it’s considered a game of chance.
- Social/skill arrangement is a type of game where the prize money is not given to players. Hence, it’s not recognized as gambling in India. However, other laws such as content rights, intellectual rights, and protection against obscenity are applicable.
- Skill games without the element of chance are clearly exempt from the prohibitions of the gaming enactment. The Supreme Court of India fully recognizes all formats of games classified under the game of skill.
What should you know about Gaming Enactments and Public Gaming Act?
The law that’s most confusing to commoners like you and me is the central Lotteries Act of 1995. This law provides an exemption to lotteries that are approved by the state on the condition that lotteries aren’t drawn more than once a week.
Since the Indian Constitution gives States the discretion to create gambling laws, state-approved lotteries from 13 states ignore the Lotteries act.
Here’s an overview of all laws and how rules apply to you as a player:
Indian constitution permits the States to have state-specific laws for betting. A few states in India follow the Public Gambling Act of 1867.
Under Gaming Enactments, the remainder of the Indian States have legislation of their own to control betting and gambling within their respective territories. This is the reason why the confusion persists even today. The Public Gambling of 1867 is an archaic law that was enforced during the British occupation in India.
Most Gaming Enactments were enforced before online gambling became an obsession, the actual rules cover betting and gambling only in land-based casinos and gambling houses.
Since the archaic Enactment doesn’t extend rules for online gambling, it has always remained a grey area before the law.
Not only are these sites operated legally, but they also originate from overseas areas where India has no jurisdiction. Therefore, the legal system has its hands tied and has the least concern to strictly enforce the law at a player level.
Are you Liable under Betting & Gambling Laws?
Many gambling houses in India continue to face the brunt of law after various States began clamping down operations. At present, it’s illegal for gambling houses and players to do any of the following:
- Ownership and maintenance of Gambling houses or casinos
- Promoting or rewarding prize money to people visiting gambling houses
- Organizing and participating in betting games at the gambling house
- Conducting any form of business in the gambling house
In a few Indian States, gambling on-premise is a serious offense that easily puts players and organizers on the wrong side of the law. If you’re from the State of Orissa or Assam, be wary of the local laws to avoid committing a culpable offense.
The onus of determining whether the game is a game of chance or skill falls upon the legal institutions by weighing individual circumstances and facts.
Further, you can argue the case by presenting facts because not all formats of games played online are covered under existing laws.
The exemption of games from Gaming Enactments weighs on “mere skill”- the key qualifier. The law examines each case to understand the applicability of mere skill to the case and determine if the betting game is legal or not.
What does FEMA Say?
Therefore, if you’re transacting with betting companies registered in places outside of India, the onus falls upon you to ensure payment of the tax and levies applicable to your winning as per the income tax act and the Goods and Services Tax (GST).
Failing to do so can attract stiff penalties.
As of 2019, gambling and betting laws in India are clear that betting and gaming in land-based casinos are 100% illegal.
However, the umbrella law is generic and doesn’t provide comprehensive guidelines on online gambling because the States are given the power to frame state-specific laws.
This has allowed organizers of betting games to conduct game activities under the State license. Therefore, playing betting games online wouldn’t make your actions illegal in the eyes of law, so you needn’t worry about facing the wrath of the legal system.
However, the prize money that you win from the slot, card, betting, lotteries, and horse racing will be subject to tax laws where a flat 30% tax is applicable to your earnings in addition to surcharge and cess.
If you’re indulging in online sports betting, your actions are deemed legal due to a lack of regulations that cover the online games that allow remittances to India.
Therefore, as long as you’re paying the tax for your net income as well as the 30% tax applicable to the revenue earned from gambling, you’re guaranteed to remain on the right side of the law. In such cases, when you make remittance to India, you wouldn’t be violating the FEMA regulations.
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