Before we go ahead and answer the question above on “Is betting income taxable in India?“, let us help us distinguish what comes under betting and gambling. Games like fantasy sports, poker, rummy, and others come under the ‘games of skill’ category which is not considered as betting, even though it involves wagering real money. On the other hand, there’s sports betting and casino gaming, which is considered gambling.
Either way, yes, betting income is taxable in India under the Income Tax Act, 1961. Winnings from any form of betting or gambling are considered ‘income from other sources’ and are subject to a flat tax rate of 30%, according to Section 115BB of the Act. This tax rate is applied regardless of the amount won or the individual’s other income and applicable tax slab, or whether it’s from online or other betting.
Additionally, 4% health and education cess is levied on the income tax, making the effective tax rate 31.2%. It’s important to note that no deductions or exemptions under other sections of the Income Tax Act (such as Section 80C or 80D) are allowed against betting income. Furthermore, any expenses incurred to earn this income, such as the cost of a lottery ticket or deposits made towards online gambling, cannot be deducted.
Is betting tax free in India?
Tax Deducted at Source (TDS) is also applicable to winnings from betting and gambling if the amount exceeds ₹10,000 in a single transaction. The payer (Example: The online gaming platform or lottery organiser) is responsible for deducting TDS at the rate of 30% (plus applicable surcharge and cess), resulting in an effective TDS rate of 31.2%, at the time of facilitating a withdrawal.
This TDS is basically deducted before the winnings are disbursed to the recipient, and the total withdrawable amount is usually shown to the player. This is seen on all online gaming platforms like Dream11 and My11Circle in fantasy sports, while poker apps like Adda52, A23 Poker, Spartan Poker, PokerBaazi and others also follow the same. However, this TDS deductions aren’t done by offshore betting sites operating in India, like Parimatch, 1xBet, Fairplay, 1Win, and others.
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While these offshore sites don’t deduct TDS, any income in the form of winnings have to be declared as ‘income from other sources’ and will be taxable. And even if TDS has been deducted from legal gaming apps, the winner is still obligated to declare the gaming income in their Income Tax Return (ITR). They can then later claim credit for the TDS already deducted.
For online gaming platforms, including fantasy sports apps where real money can be won, these rules apply. Winnings are taxed at a flat 30%, and TDS is applicable on the net winnings. The net winnings are calculated as the total withdrawals plus the closing balance in the user’s account at the end of the financial year, minus the total deposits and the opening balance.
Key points on taxation of gaming income:
- Tax rate: Flat 30% under Section 115BB.
- Effective rate: 31.2% including cess.
- No deductions: No deductions or exemptions are allowed.
- TDS: Applicable at 30% (plus cess) if winnings exceed ₹10,000. For online games, TDS applies to net winnings without a threshold.
- Reporting: Must be declared as “Income from Other Sources” in the ITR.
- Category: Skill games is gaming income. Playing on offshore gambling sites is betting income.
FAQs – betting taxation in India
Q. Is Dream11 income taxable?
Ans. Yes, income from fantasy sports platforms like Dream11 is taxable in India. These winnings are considered income from online games and are taxed at a flat rate of 30% under Section 115BBJ of the Income-tax Act. 30% TDS is applicable on the net winnings under Section 194BA of the Income-tax Act. You are required to report these winnings in your ITR under ‘Income from Other Sources’.
Q. How much tax on 1 crore lottery?
Ans. If you win ₹1 crore in a lottery in India, it will be subject to a flat tax rate of 30%. Additionally, a 4% health and education cess will be levied on this tax amount. So tax: 30% of ₹1 crore = ₹30,00,000 | Cess: 4% of ₹30,00,000 = ₹1,20,000 | Total tax payable: ₹30,00,000 + ₹1,20,000 = ₹31,20,000. Thus, the net amount you would receive is ₹68,80,000. Furthermore, if the winnings exceed ₹1 crore, a surcharge may also be applicable, further increasing the effective tax rate. TDS at 31.2% would typically be deducted by the lottery organiser before disbursing the prize money.
Q. How to avoid betting tax?
Ans. It is not possible to legally avoid paying tax on betting income in India if the income is earned. Betting income is taxable under the Income Tax Act, and there are no legal avenues to completely avoid this tax. Attempting to evade tax can lead to penalties and legal consequences. Some common misconceptions about avoiding betting tax include:
- Not declaring the income: This is illegal and can result in penalties and interest charges.
- Splitting winnings among family members: Tax authorities may consider this as tax evasion, and gift tax provisions might also apply.
- Claiming expenses: Expenses incurred to earn betting income are not deductible.
The best course of action is to declare all betting income accurately in your annual Income Tax Return and pay the applicable taxes. If TDS has been deducted, ensure you claim credit for it while filing your return.
Q. Is betting income legal in India?
Ans. The legality of betting in India is a complex issue as it varies by state. Gambling and betting fall under the purview of state governments, and each state has the authority to formulate its own laws. Indian law often distinguishes between games of skill and games of chance. Games of skill are generally exempt from gambling prohibitions. Fantasy sports platforms like Dream11 have been argued in court to be games of skill and thus legal; however, this interpretation can be subject to change and may vary across states.
While some forms of betting like horse racing and state lotteries are generally legal, and the online space exists in a grey area nationally with some states imposing bans, it’s crucial to be aware of the specific laws in your state of residence regarding betting activities. For similar updates from the world of online betting, remember to always keep coming back to ReadScoops.com.
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