Home / Gambling laws in India / FAQ on taxes and gambling winnings

FAQ on taxes and gambling winnings

Despite the earlier post  giving various provisions on taxes on gambling winnings, we have been receiving hundreds of queries seeking clarifications on the amount of tax to be paid on gambling winnings and different circumstances under which an exception can be sought from paying tax at source on gambling winnings. We have thus collated a few practical scenarios in a FAQ format clarifying different tax related aspects concerning gambling, lottery and betting winnings. The position of law has been clarified by Hersh Sayta of Ernst & Young and other eminent Chartered Accountants, lawyers and poker players having practical experience in the subject.

1.      What is the rate of Income Tax payable on winnings from any card games, lotteries or other gaming activities?

As per Section 115BB of the Income Tax Act the current rate of Income Tax (as on financial year 2013-14) on poker winnings or winnings from any such card games etc. is 30%. However there is education and higher education cess payable on the taxable amount and hence the total effective amount of tax payable is 30.90%.

Section 2(24)(ix) of the IT Act defines card games and lotteries as follows:

“Any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.

 [Explanation.—For the purposes of this sub-clause,—

 (i)  “lottery” includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called;

(ii)  “card game and other game of any sort” includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game.”

Section 115BB reads as follows:

Tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever.

“Where the total income of an assessee includes any income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, the income-tax payable shall be the aggregate of—

 (i)  the amount of income-tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, at the rate of 21[thirty] per cent; and

(ii)  the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).”

2.      Are organisers compelled to deduct Tax at Source (TDS) on poker winnings?

As per Section 194B of the Income Tax Act, on any winnings above Rs. 10,000/- (as per laws prevailing in financial year 2012-13) it is the responsibility of persons organising or managing the event to deduct 30.90% tax before releasing the winnings.

Section 194B reads as follows:

Winnings from lottery or crossword puzzle.

The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding ten thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :

Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings.

3.      Are organisers required to give a TDS certificate when tax is deducted on winnings?

 Yes, as per Section 203 of the IT Act and Rules framed thereunder TDS certificate has to be supplied by the deductor to the deductee “within one month from the end of the month during which the credit has been given or the sums have been paid.” [See this link for more information].

4.      If prizes are awarded instead of cash, does TDS still have to be deducted?

 Yes, TDS has to be deducted to the extent of 30.90% of the value of the gift/prize or the organiser has to ensure that the winner pays the tax amount upfront.

5.      What is the liability for not deducting TDS?

Organisers or those responsible for the event can potentially face various liabilities for not deducting TDS and they would have to pay the amount payable, interest and other penalties from their own pockets if the amount is not deducted. Further, prosecution can be initiated for non-deduction of TDS and there is a maximum punishment of seven years imprisonment and fine. [See: Sections 201(1A), 221, 276B of the Income Tax Act].

6.      Are set-offs permitted before deducting of TDS?

No, set-offs or any deduction/adjustment of costs etc. would not be permitted before deduction of TDS.

7.       Is there any liability to deduct additional surcharge over and above the 30.90% TDS in case of gambling winnings?

As per the Finance Bill 2013, an additional surcharge is proposed to be levied on income from gambling under Section 115BB as TDS deductions under Section 194B on amounts exceeding specified limits. The manner and rates at which this surcharge is to be levied has not yet been notified.

Update: As per the Finance Bill, 2013 the following surcharge will be levied on the TDS deducted as per Section 194B:

The amount of tax so deducted shall be increased by a surcharge in the case of—

(i) every non-resident (other than a company) at the rate of ten per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees ;

(ii) every company other than a domestic company at the rate of two per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees but does not exceed ten crore rupees ;

(iii) every company other than a domestic company at the rate of five per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds ten crore rupees.

For Income Tax on gambling winnings in terms of Section 115BB the following surcharge shall be levied:

Total income Rate of surcharge for domestic companies Rate of surcharge for foreign companies
Up to Rs. 1 crore NIL NIL
Over Rs. 1 crore 5% on tax to be paid 2% on tax to be paid

 The provisions relating to surcharge shall be applicable w.e.f. 1st April 2013.

Did you like this? Share it:

About Jay Sayta

Jay has researched extensively on gaming laws and has been cited by various media houses and journals as an expert. He has helped leading newspapers in their stories on gaming laws. Jay completed his B.A. LL.B. (Hons.) degree from NUJS, Kolkata in 2015 and is currently based out of Mumbai.

Check Also

gambling_winning_tax

Easwar committee recommends increasing TDS limit for gaming winnings to Rs. 15,000

Exclusive A committee headed by Justice (retd.) RV Easwar has recommended increasing the threshold limit for …

59 comments

  1. umesh.sidigonde

    If in marriage function playing card game by individual to who Tax audit u/s44AB and 44AA is applicable
    Q)That individual is required to deduct TDS or nor?
    Q)IF yes what are provisions will attracts as per Income Tax
    Q)What is the %?
    Q)It is one time activity!

  2. The person who is organising the marriage function/card game has the onus of deducting TDS is amount of prize/cash is greater than Rs.10,000/- then he has to deduct 30.9% TDS before giving the winnings, if the amount is less than that then the winner has to himself pay the requisite tax while filing the returns.

  3. What if the money is received from case 1 . In foreign currency case 2. Indian currency do we have to pay 30.9% tax in both the cases

  4. Yes tax has to be paid in any case.

  5. In case of foreign winnings, onus might be on you to pay the taxes and may depend on DTAA with the other country and FEMA restrictions.

  6. Hi Jay,

    I have a query, I won 10 lakhs in Goa casino but they not provided any proof of winning but i need to deposit in Bank and need to file the tax but what should i mention as prrof income if they not provided any?

    Please guide me..

  7. If they have deducted TDS, then they are obligated to give a TDS certificate, else you can only show it as gambling winnings under Section 115BB of the Income Tax Act during final returns.

  8. I WON A PRIZE OF 40000/- IN SIKKIM LOTTEREY. I HAVE NOT ANY OTHER INCOME. TDS DEDUCTED FROM MY PRIZE AMOUNT WILL BE REFUNDED TO ME AFTER FILING INCOME TAX RETURN OR NOT.

  9. You would have to consult your tax expert/CA though it seems that this TDS may not be refundable.

  10. If I am playing with my money for which i have payed tax and my friend is playing with his money for which he has paid tax. In a game with just the two of us, why would either of us be taxed on the winnings?

  11. Technically tax still will still have to be paid though since there is no owner/organiser, TDS deduction may not be made.

  12. shraddanand dsouza

    As per Section 194B of the Income Tax Act, on any winnings above Rs. 10,000/- (as per laws prevailing in financial year 2012-13) it is the responsibility of persons organising or managing the event to deduct 30.90% tax before releasing the winnings.

    My question is
    – Suppose i win Rs. 20,000 in a poker game , as per the Income tax act, TDS will be deducted on entire Rs 20,000 or will it be on 10,000, as the law says TDS any winnings of above 10,000.

    Please suggest

  13. TDS would be on winnings of Rs. 10,000/-

  14. shraddanand dsouza

    I won Rs. 15300/- in a rummy game. But i got only Rs 12,088/-. So i was charged a TDS of Rs. 3,212/-.
    Please note: Table joining fees was Rs 3000/- of which 15 percent(i.e Rs.450) will be organizers service fees.

    I want to know if this was correct or did they charge more TDS.

  15. Hi ,

    If a senior citizen wins a lottery of 30 lakh and he has no other income. and TDS is deducted for the winning prize. Is he liable to file income tax return?

  16. Yes TDS will be deducted and returns have to be filed in this case.

  17. Kindly consult and take the services of a professional accountant for the same.

  18. I just saw this article on Hindustan Times which says that poker is a legitimate sport in 23 Indian states.

    http://www.hindustantimes.com/specials/cricket/t20/chunk-ht-ui-t20-spotfixing/sports-betting-legal-in-sikkim-but-sites-scared/sp-article10-1070497.aspx

    And there are even verdicts in India to the effect that poker is a game of skill. Despite all this, does FEMA law still apply when remitting poker winnings in India? And what do you think are the chances that the new govt can make positive changes to existing gambling laws? Thanks.

  19. Its not correct to say that poker is legal in 23 states. There is no conclusive position or verdict to back this. As regards elections and new government’s likely piece on gambling legislation you can read this http://glaws.in/2014/05/election-results-2014-and-impact-on-the-indian-gaming-industry/

  20. Thanks Jay. And what is the punishment for remitting poker winnings apart from fine up to 3 times the remitted amount?

  21. No other punishment except fine.

  22. Hi,

    Does a person who has no other income and their yearly winnings are under say 150k have to file returns for the said winnings?

    Also if a person does have taxable income but their net winnings in card games are less than net losses, does this have to be reported when they file their tax returns?

  23. Does a person who has no other income and their yearly winnings are under say 150k have to file returns for the said winnings?

    Also if a person does have taxable income but their net winnings in card games are less than net losses, does this have to be reported when they file their tax returns?

  24. If you have any winning then you have to pay income tax 30%.example if your winning is 5 lakh and losses is 6 lakh the you have to pay tax 30% of 5 lakh = 1.5 lakh.(no loss can be set off against gains from within lotteries, crosswords, puzzles, card games or other gambling under section 58(4)).

  25. I don’t have any income sources I bet on horses can i claim the TDS deducted on winnings lf i can claim what is the maximum amount pl. let me know.

    Thanks
    Venkat

  26. i wanted to know if i win a huge amount in london gambling site while withdrawing funds from neteller will it be a problem..? like i have done previously to my frnd 20000 and 20000 each time! and twomorrow if i win 30lakhs then what can be the legalities i can face i am from AP state right now!

  27. if a Indian citizen who goes on a tour abroad wins a lottery and that country the winning is tax free does the person still have to pay over here for his winnings and on the contra if the if he wins a lottery in a foreign country and tax is deducted in that country does he still have to pay the tax.

  28. If there is no DTAA mentioning gambling/lotteries with the foreign country, you will have to declare and pay Income Tax in India.

  29. While on a foreign trip if I win big amount in the casino , will I have to declare the same at airport on arrival . Normally casino does not give any receipt
    . How will I prove the winnings

  30. I have the same question… Please help us out… Thanks…:)

  31. Mayor- it will be a FEMA violation and potentially there can be proceedings against you under Income Tax as well as FEMA Ac.

  32. My friend and I (Indian Citizens), are in Canada on Work visa. My friend won lottery of $1M. There are no tax on winnings in Canada. Do he need to pay tax to Indian Government? What if he just want to keep his winning in Canada, not transfer any money to India at all, does he still need to pay taxes to Indian government.

  33. Sir,
    I am a regular purchaser of big ticket USE. IT’S price is always above 4 Crores of Indian rupees.I am working here with residents visa for the past 4 years.
    so if I win this huge amount, is it required to pay tax in India.
    And please tell me, what is DTAA.is it applicable to Big ticket Abudhabi,Please replay.Thank you.
    Regards,
    viswanadh

  34. Ignatious D'Souza

    If a NRI while he is abroad wins a European Lottery, can he transfer the money to his NRE account? What about tax?

  35. Hi,

    I won 100 euros in online lottery its London based website. while withdrawing that amount I am not able to get that, because Indian banks not supporting to get any type of gambling amount. Is that true?
    How I may get that amount?

    Please suggest me.

  36. hi
    my friend won 26000/- in horse race in hyd.he does not have any other income.but he pay tds 7800/-. not only time he win many tickets in horse racing and paid tds. how can he get back tds amount.

  37. Sir,
    I have won a small amount of Rs. 238/- from Intution games from foreseegame.com is that amt should be included in my total income or tds should be deducted?

  38. you have to report this in your total income but no tds is payable

  39. hi

    i have won total rs 98000 in card game in the financil year 2014-15 and my salary income was rs 86000 Hence total 38000 tds dedctuted including salary and winnings on cards..now i have filed the ITR where my auditor is showing that only 9000 refund and he dedctued 28000 as tax payble.. is it right???

  40. hi

    my total earnings in financial year 2014-15

    winnings on card game-98000 and tds deducted for this is 38000

    toatl salary income was 86000 and tds deducted rs 9000

    now in ITR there is only 9000 refund.. my qus is that total tds 38000 shuld be refund right?? or is there any tax payble for winnings on cards????

  41. Hi , Anyone please reply to my following query
    I have a full time job on which i pay tax and i also pay taxes on fd’s and rd’s in my bank account.
    Now lets say i deposited 10000 amount in 5 different poker websites online (1 international and 4 national).
    So my total spend is 50000 rs. Now i withdrawn 30000 rs from national one in my account.

    Do i need to pay tax on this 30000 Rs ??? If yes, then why ? My total spend in this case is 50000 Rs.
    How do i state all these in my tax form ????
    please reply anyone

  42. I won Samsung Galaxy S6 Edge Plus in a contest & now they are asking for ₹17070 as gift tax. Is it really, if someone wins prize instead of cash he has to pay tax. Plz guide me.

  43. Yes- but it is not gift tax, it is 30% income tax.

  44. Dear Sir,
    If anybody from India wins a foreign lottery jackpot like powerball / megamillions then what will be the tax rate. Say for example if any one wins 1 million then what will be the tax rate. How much tax will be deducted from his winnings ? Usually us federal laws deducts 30 % tax from the winnings of the lottery. Then if anyone from India wins the jackpot then in India whether I have to pay another 30.9 % from my winnings I.e. I have to pay 60.9 % as tax. Is it so plz clarify this ?

  45. Dear Sir,
    If anybody from India wins a foreign lottery jackpot like powerball / megamillions then what will be the tax rate. Say for example if any one wins 1 million then what will be the tax rate. How much tax will be deducted from his winnings ? Usually us federal laws deducts 30 % tax from the winnings of the lottery. Then if anyone from India wins the jackpot then in India whether I have to pay another 30.9 % from my winnings I.e. I have to pay 60.9 % as tax. Is it so plz clarify this ?

  46. Hi Jay,

    I have a same question as Utpal. Hoping that you would throw some light on the query…

  47. yes you have to pay tax again in India

  48. I’m a non resident and suppose if I win a lottery on 4 crores in India. What would be my tax liability?

  49. I won 38000 in casino last month I m a government employee I file my return every year. Now how to file gambling winning returns. As I only know 30.9% tax to be paid on gambling winning. Plz tel me how to file returns and is it illegal for me

  50. Its not illegal, you only need to disclose the winnings and pay tax.

  51. Currently, I am working in USA on H1B visa. I came to US in JAN 2015. So for income tax purpose, I am Non-Resident Indian for financial year 2015-16. I have query regarding lottery winnings outside India. After reading other Q/A in this blog, I understood that if NRI wins lottery in USA, the lottery winnings can be transferred to Indian Bank account legally. If I win lottery in April 2016 and permanently come back to India in Jun 2016, I think I will be considered Resident Indian for financial year 2016-17. In this case, will I be able to transfer lottery won in April 2016 to my Indian bank account? Will it be considered illegal? If yes, that means, I will have to stay in US at least till Oct 1, 2016 so that my India stay will get reduced to less than 182 days and hence I will be considered NRI for FY 2016-17. The lottery won in April 2016 will be legal in this case. Please advise. Thank You!

  52. No service tax is applicable on casinos. The rationale is that a gaming tax is already being levied on them by the state governments.

  53. Very Informative. Was doing some research for my startup and got most of my queries answered – through the article and by responses to comment. Thanks Jay.

  54. What if someone wins an European Lottery through online and If the amount is remitted to India will it be considered Illegal ? Will the amount be fined or just we need to pay the tax ?

  55. Hi Jay,

    Thanks for the nice article! I have won a car worth Rs. 6,55,000/- in a lucky draw. Does the amount of tax I need to pay depend on my income tax slab? or Is it a flat 30.9%?

    Thanks,
    Murthy

Leave a Reply

Your email address will not be published. Required fields are marked *

[%%LINKS%%]