Taxes on gambling winning
Gambling has been a highly adopted concept and many of us have been practising it since before Independence. With just a few advancements in this primaeval activity, the number of people engaging in gambling, be it offline or online, has increased a lot. Well, it’s justified seeing the varied options one has, starting from classic card betting, lotteries to the modern form of horse betting and much more.With the increase in demand, there has been an exponential growth in online casino ofcource there is legality on playing real money games. Gambling is illegal in some parts of India, and considering the hurdles, online casinos and betting websites have turned out to be a hit! The number of wins and lost games also has increased and with this, the taxation policy & legality are a big thing! Knowing about these things is a must, as it can make you cross that thin line and make you an offender.
In reference to a recent report, 40% of Indians are involved in gambling of different types. Imagine the number of players engaging on such online casino sites and how it benefits the government in form of taxes. Remember that any income earned from gambling, betting or online casinos in India is fully taxable. Betting on games based on skill is not illegal in India, whereas betting on games based on luck is an offence.
So, with no further ado, let’s jump right into knowing the taxation policy and legal issues related to gambling in India. We will talk about the games that you can try betting on, and what are the taxes you are liable to pay. So, read along and find everything you need to.
Important things to know for Taxes on Gambling
- Every income coming from casino and gambling channels (be it online or offline) is taxable.
- If the income exceeds ₹10,000, players are required to report that in the annual tax form.
- A 30% tax rate (TDS) excluding cess applies to all winnings over ₹10,000 coming from casino games, lotteries, horse race betting, fantasy, jackpots, card games, or others.
- Cess is added to the basic tax rate and is to be incurred by all.
- Reporting of taxes is not done by offshore online casinos, so if you are playing at any, ensure to manually report the income tax return.
Laws may differ from state to state, but the tax policy works the same for everyone.
Different games on which taxes are applicable
Horse Racing –
Horse racing has been part of betting for a long time now. In comparison, to the foreign countries, the Indian betting market sees less of this betting type, but it’s still ranked top in India.
Earlier, there were many questions related to its legalities in India. To clear the air, the Indian Supreme Court ruling of 1996 stated that horse race betting is a skill-based game that requires knowledge and understanding of multiple things like the horse breed, the training, the racetrack, and the abilities of the jockey. Being based on skills makes horse betting legal in India. No doubt, why it is rising on the charts!
Coming to taxes, when a player’s winning in any form, be it cash or an asset, exceeds ₹10,000, is liable to pay a tax of 30%. (Source: Income Tax Act of 1961)
Fantasy game
To all those who miss betting on sports, fantasy gaming is worth giving a shot! With sports betting stated illegal, you can now use your judgement and create a team of your own that bags you point which can be used as cash. Till the time there are no rigid rules against online betting, you can place your bets worry-free.
On winning an amount of more than ₹10,000, a tax rate of 30% applies on the amount, excluding the cess and exemption limit. They make these tax deductions under section 194B of the ITA. The online gaming platform will reflect these transactions in Form 26-AS on your behalf. You can claim the tax credit while filing your ITR.
Poker
The gameplay of poker is not unknown to many, as we all might have played this game, with or without money. Betting on your card values and variations is what this game is all about.
When playing poker, if you win, a TDS amount of 30% and an extra 0.9% tax is applied. The extra tax is called the education cess tax which brings the total tax value to 30.9%.
The TDS is usually dedicated by the online casino before releasing the winnings, but if that didn’t happen, you will have to file for 30.9% income tax by yourself within 30 days after they add the winning amount to your account.
Lottery
Any lottery-based game online is also considered for taxes. The taxes liable are similar to the previous games, so ensure the terms & conditions to avoid falling into a problem.
Rules pertaining to taxes differ from state to state, whereas the lowest tax rate on winning at state-run lotteries is 28%.
Online casino games
These are the games that are played the most when it comes to gambling. The reason being variations, ease and convenience. While many are losing at such games, people are winning X4 times their investment as well. It’s all about your judgement and understanding of the game.
The tax on an online betting casino is 31.2% including cess and basic exemption limit. These are applicable only if our winning amount exceeds ₹10,000. The bigger you win, the bigger tax you pay.
Jackpot
We can consider jackpot games as part of a lottery, as they get you a huge amount of money in a short time. The legal status for such games is positive, and you can play them at any online casino. Although, there may be restrictions depending on your geographical location in India.
The taxes are the same as the previously mentioned games, and you have to abide by them in order to enjoy the winnings with no problem.
Standard Betting Taxes in India
The betting rules in India are diversified based on the state you are in. Where some states allow you to gamble, some don’t. Although online betting does not have any set rules, it is legal for an Indian player to bet on an overseas online casino.
Just like every hefty revenue is taxable in India, online betting is not different. The income you earn while playing at an online casino fall under the heading “Income from other sources” and is part of section 115BB of the Income Tax Act.
This section regulates incomes coming through winnings from online betting, card games, horse race betting, gambling, or similar sources. A flat rate of 30% is charged as a tax on such winnings, excluding cess. After adding the cess, we get a net rate of 31.2%, excluding the basic exemption limit benefit.
Every reputed online casino deducts these tax amounts from the winnings before giving them to the player. They are usually called TDS (tax deduction at source) and it is laid down under section 194B, which is applied when the winning amount is more than ₹10,000. You cannot claim any education or expenditure against this income.
Disclaimer – Even though TDS is deducted, the taxpayer has to still show this income while filing income tax returns.
As betting has shifted to online, the winnings are mostly in cash, but if sometimes you receive winnings in physical form, then the tax rate will apply to the market value of the physical prize. The tax deduction is to be done before having over the gift.
Different taxes for hefty wins
As it is said, the more you earn, the more you pay. When it comes to taxes on winnings from gaming and betting, some surcharges are added, based on the earning group. Supposedly, if your winning amount exceeds ₹50 Lakh, a 10% surcharge is added to the basic tax rate, which is 30%. So, 10% of 30 is 3, which brings the tax rate to 33% excluding the cess. The cess amount is the same as previously mentioned, and it brings the total tax rate to 34.32%.
If your winnings surpass ₹1 Crore, a 15% surcharge applies on the base rate of 30%, excluding cess. After adding all the additional taxes, the total tax rate reaches 35.92%. Although many online casinos don’t allow players to bet with such huge amounts, keeping player’s safety in mind.
Best Tax Tips for Online Gamblers
There is no magic potion that will get you off the hook for taxes, so don’t look out for one and get yourself in any problem. Paying taxes is essential and to ensure that this process stays seamless, we have noted down some tips that will help you stay organized and on time. Read along to find more-
Tip #1: Report all your wins
Whether it’s a small amount or a hefty one, achieved from horse betting or online betting, it is a must-have to report all your wins in your tax return. Getting away with taxes can seem beneficial for the time being, even though it’s a criminal activity that you are committing. In the long run, it can make you a fraud, and you may have to face some unfavourable situations, hence it’s wise to pay your taxes on time.
Tip #2: Maintain a separate record of winnings and losses
While doing taxes, you are allowed a deduction for your losses, so it is beneficial to report the winning and losses separately. This will help you understand the amount you have won and lost, and doing a tally will become easier.
Tip #3: Maintain records
While gambling, it is easy to lose track of time and money. If you have experimented with multiple online casinos, keep track of their names, the winnings, the losses, and the types of games you played. Also, you can mention which game got you the most wins and which made you lose. This will help you make a better choice the next time!
Tip #4: Learn about the different taxes depending on your state
Gambling rules in India solely depend on the states, so depending on your location, rules and taxes may differ. So, before starting, try to learn the different rules and taxes that your state follows, if applicable.
Conclusion:
Online gaming is fun and fruitful when played smartly, isn’t that correct?
Not having to worry about breaking any law while enjoying our favourite games online is something you can experience if you abide by the taxation policy and maintain a good tax return file. So, don’t take this lightly and be a responsible citizen and player!
Well, now that you have all the required information related to legalities and taxes on online betting and wins, head over to the best online casinos that allow you to bet on almost each of the games mentioned above. There are most of the sites that also offer free online casino games which is tax free