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Income Tax on Online Gambling - Are you Liable to Pay Taxes on your Bet Winnings?

Updated on: 04 February,2021 12:03 PM IST  |  Mumbai
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10Cric.com who has, within a few years time, managed to grow into one of the most popular betting sites in India.

Income Tax on Online Gambling - Are you Liable to Pay Taxes on your Bet Winnings?

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It is well-known among betting enthusiasts in India that the Indian gambling laws are obscure and unclear. Anything closest to a proper law is the Public Gambling Act of 1867 which, in itself, is highly outdated and doesn’t cover the specifics of internet-based betting and gambling activities - sports or casino.

 




At times, the decision has been left on to the state legislations to form gambling laws for their state and even then, there have been many certainties. And then, of course, there is the debate on classifying the games of skill and the games of chance, with the former being deemed as legal.


 

Whatever may be the case, one thing is certain - no matter where or how you gamble - online or offline, you will be liable to pay taxes on your winnings. There may not be a lot of clarity on India's gambling laws, but taxation laws are pretty clear and straightforward. You need to declare this additional gambling income while filing your taxes so you can be taxed accordingly.

How Much Tax do You Need to Pay?

As a rule of thumb, all income and winnings generated from online betting and casino-gambling activities will incur a flat 30% tax without the cess. After adding the 4% cess, it comes up to 31.2%.

 

The specifics of the same can be found in the Income Tax Act Section 194B, which essentially states that any income received by the way of a crossword puzzle, lottery, card game, or any other game, will be subjected to a tax of 31.2%.

 

As you can see, this law does not distinguish between the games of skill and chance, or even between legal and illegal games. It is certainly a natural grey area but that does not exempt it from the ambit of taxation.

 

The bottom line is no matter how you make your gambling income and irrespective of the legal status of the same, you will need to pay taxes on it.

How are the Gambling Winnings Taxed?

Rummy and poker sites in India, which are operating under legal status since they are game of chance, deduct tax at source on any winnings exceeding Rs.10,000. This is more commonly referred to as TDS and it is a general practice followed by sites which offer games of skill in India.

 

However, a majority of online betting sites in India do not follow this practice. Even though they follow strict KYC norms and ask for PAN Cards and bank statement to verify the source of funds, taxation is one area where these sites lag behind. This is why it is the player's responsibility to declare the winnings asincome from other sources. One example is 10Cric.com who has, within a few years time, managed to grow into one of the most popular betting sites in India.

 

Failure to do so may very well result in the Income Tax department sending you a notice regarding the same.  In fact, after withdrawing their massive winnings and not declaring the same in their taxes, there have been instances where players have received notices from the authorities, enquiring them on their taxation.

 

It is also worth noting that any income made from betting or wagering will not be subjected to the benefit of the deduction, as under the Section 80C of the Income Tax Law. The entire amount from the winnings will be fully taxed, without any deductions from investment, house rent, medical insurance, et cetera.

Parting Thoughts

No matter what the case is, we always urge you to bet safely and responsibly. And make it a point to pay taxes on your winnings before the authorities come knocking on your door, figuratively speaking. At 31.2 per cent, it is not that much of a stretch, especially considering if the winnings are in five figures and higher. This way, you do not skirt any laws and continue to enjoy gambling within the purview of the law.

 

 

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