Gambling has always been one of the most attractive activities for punters. Whether it be casinos or betting on sports, the Indian government has always been strict about how Indians should not engage in any act of physical gambling. However, since real-life gambling is banned in the country, there is no rule against online gambling being banned through websites or even mobile applications.
One of the important facts that you might have missed is where it is illegal in India to earn from gambling, the Income-tax department doesn’t seem to care about that and hence does not put any restrictions. The only thing they say is “Please pay your taxes”. This means online gambling is taxable.
Let’s take a look at what are the rules for taxes on gambling winnings that you will have to take care of with your online casino winnings in India.
Income Taxes on Gambling Winnings
As we have already discussed, online gambling is still not banned by the government, and the income tax department has already mentioned paying taxes on gambling winnings. Let’s take a look at how much tax you need to pay for your gambling winnings. The flat rates on your gambling winnings are 30% + 4% Cess i.e., 31.2%. In addition to these tax charges, gamblers are also not allowed to exceed 2.5 lakhs in other assets.
TDS on prize money
According to section 194B, if a gambler wins more than 10,000 in cash prizes then they will receive their prize after a TDS 31.2% of deduction. In addition to this, it will not matter if the income source is taxable according to the tax department or not. As shown in Form-26AS, the prize distributor is also liable to deduct taxes on gambling winnings at the time of payment. However, the gambler is allowed to apply for TDS on their winning while filing return of income.
The law regarding the taxes on gambling winnings, betting, or online lottery in India comes under the heading of “income from other sources” in section 115BB of the Income Tax in India Act, 1961. Under section 194B of the Income Tax Act, 1961 TDS (Tax Deducted at Source) is to be applied on all winnings that exceed the amount of 10,000.
It means that the taxes on gambling winnings must be deducted by gambling websites on winnings before giving out the rest of the winnings to the winners. Plus, the tax rate on gambling winnings in India through gambling, casino winning, etc. is non-returnable in the tax returns.
Minimum Amount of Taxes on Gambling Winnings
To understand this better let’s take an example, Mr., X is playing online casinos and has complete transactions worth 1 crore. However, his casino winnings in India are only 10 lacs rupees when it comes to winning. So, Mr. X will be taxed based on their winnings which are 10 laces rupees not on the sum of total transactions they have made which is 1 crore. To put in simpler words, taxes on gambling winnings is only applicable on your winning amount and not on the total amount of transactions made by you.
When it comes to taxes on gambling winnings, there is no deduction or expenditures are allowed from the tax department. All the winnings will be taxable at a flat rate of 30% + applicable surcharge and Cess.
When winnings are in form of gifts
When gamblers win something in the form of gifts like cars, motorbikes, and such. They are taxable on that too. However, this time the prize distributor has to make sure that TDS has been paid based on the market value of the car. To put it in simpler words, let’s assume Mr. X won a car in a gambling tournament. Now before handing the car over to Mr. X, the tournament organizer has to make sure that the TDS according to the market value of the car has been paid.
On the other hand, if winnings are partly in cash and partly in gift form. Then the tax rate on gambling winnings will be separated based on cash as well as the market value of the prize that the participant has won. To make this transaction simpler, the organizer can also deduct the tax on both cash and gift from the cash prize that the participant has won before transferring the money.
The tax rate on gambling winnings is not only applied to gambling and lottery but also to game shows like “Kaun Banega Crorepati” or “Big Boss”.
Is Gambling legal or illegal in India
Gambling has a very long history In India. Indians have been playing card games in festive seasons and holidays for centuries. Without teen Patti, the festival of Diwali feels like it is missing something. Indians have always loved betting sites and gambling even before the Mughals or the Britishers came to India.
The legality of gambling has always been a complicated and confusing subject in India. Because of the popularity of online gambling and traditional casino gambling, it is even more important to understand what are the laws that regulate the gambling industry and what are the taxation rules for gambling in India. There are many different laws for gambling in each state and they regulate gambling differently for themself. But with the rise of UPI casinos and Google Pay Casinos, people are less worried.
Most state laws don’t make it clear if online casino games, fantasy sports games or online rummy is legal or not. They neither deny nor affirm the legality of this type of gambling but certainly don’t forbid them. Some state law says that as long as the game requires a certain level of skills the game is considered legal.
The first law regarding gambling in India was enacted by the Britishers in the 19 centuries. In 1867 they passed the Public Gambling Act 1867. So, running and visiting gambling houses in India was prohibited by the central law, Public Gambling Act 1867. In case of revocation of the prohibition, the guilty person can either be charged a fine or sentence to jail or both. The law is valid in India. But some states have their own recognized laws like Goa and Sikkim. The whole gambling ban issue has been allowed on the condition that there have to be some skills involved and cannot be completely dependent on luck.
How does the earning from gambling affect your income tax?
Regardless of the amount of money earned through any kind or nature of gambling, betting, lotteries or television shows the tax rate on gambling winnings will not be affected. If your annual income is ‘X’, then you need to pay income tax according to your tax slab only. If you win a casino jackpot worth 1 crore, then you have to pay 31.2% tax rate on gambling winnings. You don’t have to pay anything extra for your normal income tax. It is people’s responsibility to mention the details of TDS deductions in the amount received when filing the Income Tax Return.
Power over Gambling regulations
It has to be seen that in India, according to Seventh schedule entry 36 list II of the Indian constitution all the issues related to gambling falls under the authorities of the state, and only states can make laws and regulation regarding the taxation on winners and legality of gambling regardless if the gambling is online or physical.
It must be noted that online gambling which can be considered a high-tech and modern way of gambling does not fall under “The Information Technology Act 2000”. However, the act does prohibit the publication or transmission of information that can or may corrupt people with serious punishments. The state of Maharashtra has banned online gambling under “Bombay Wager Act 2017”. The state of Telangana and the state of Andhra Pradesh have also banned any kind of online gambling for Indians and it is a punishable offense by sentencing the guilty up to one year in jail or changing a fine.
Casinos which can be considered a physical form of gambling, on the other hand, are different. In India, in three states Goa, Sikkim, and Daman, casinos are allowed and legal. In the state of Sikkim, there are two casinos named Casino Sikkim & Casino Mahjong. The government controls gaming under Sikkim Online Gaming (Regulations) Amendment Act, 2009. The state of Sikkim is also the only state to have allowed online gambling websites to promote gambling. Sikkim is also the only state to have an online lottery in which people from all over India can participate.
Gambling in the states of Goa and Daman Diu falls under the control of the Goa, Daman, and Diu Public Gaming Act, 1976. Gambling in goa is legal only in 5-star hotels or offshore vessel casinos. There are four casinos in the Mandovi river and six inland casinos. All the casinos have to be given a license by the state and the license transferable under the 2012 amendment where a transfer fee has to be paid.