Won big on platforms like Dream11, PokerBaazi, RummyCircle, or My11Circle and now wondering how to save tax on winnings from gambling in India?
Here, we break down the tax implications of gambling income in India including the offline and online worlds. We also explore strategies to minimize your tax burden.
Overview of Tax on Gambling Winnings in India
In India, gains from gambling are taxable under the Income Tax Act of 1961 specifically Section 115BB.
Regardless of whether the gambling takes place online or in real casinos, this section provides a clear structure for how such earnings are handled for tax purposes.
Applicable Tax Rate:
- In India, winnings from gambling including non-monetary prizes, are taxed as income from “other sources.”
- A flat rate of 30% is applicable on the gross winnings, irrespective of your income tax slab or the amount won.
- For non-monetary prizes, the taxable amount is calculated based on the market value of the prize at the time it is awarded.
- This applies uniformly across different forms of gambling – Dream11, PokerBaazi, or horse racing, casinos, Crossword puzzles and lottery games.
Tax Deducted at Source (TDS)
- The payer (e.g., casino, lottery organizer) is required to deduct 30% TDS before disbursing the amount.
- In case of earnings from horse betting, TDS is applicable only when the earnings exceed INR 10,000.
- For non monetary rewards, the TDS of 30% is deducted based on the fair market value of prizes.
Cess and Surcharge:
In addition to the 30% tax, a cess of 4% (Health and Education Cess) is levied on the tax amount.
High-income earners may also be subject to an additional surcharge, depending on their income bracket.
No Deductions or Exemptions:
Taxpayers cannot claim deductions under Section 80C or any other sections on gambling winnings. Even expenses incurred on purchase and while earning the prize cannot be deducted.
Compliance and Reporting:
Winners must report their gambling income when filing ITR as “Income from Other Sources”.
This is regardless of their total income level. This means that even if a person’s total taxable income falls below the basic exemption limit, she/he is still required to declare gambling winnings and pay the taxes. Failing to do so can lead to penalties.
How to Save Tax on Winnings From Gambling in India: 5 Legal Ways!
Saving taxes in gambling income can be tricky due to the stringent laws and regulations. However, there are a few ways that can help minimize tax liability on gambling income:
1.
Make Use of Tax Credits:
If TDS has been deducted from your winnings, ensure it is reported correctly in your Income Tax Return (ITR).
You can claim this TDS as a credit against your total tax liability, which can help reduce the overall amount payable.
2.
Consult Professional Tax Advisors:
Engage a qualified chartered accountant specializing in income tax. Top firms like PKC Management Consulting can provide personalized advice based on your specific gambling income.
They can also develop a comprehensive tax planning strategy that helps lower your overall tax liability.
3.
Claim Deductions Where Applicable:
Although gambling winnings themselves do not allow for deductions under Section 80C or similar sections, make sure you claim any eligible deductions related to your overall income when filing your tax returns.
This can help reduce the overall tax liability.
4.
Understand Full Disclosure & Maintain Records
Although seeking tax optimization is legal for all kinds of income including gambling, complete transparency is of utmost importance.
Make sure you report all gambling winnings accurately with the required documentation. Avoid any form of tax evasion, which can lead to severe legal consequences or penalties.
5.
Be Aware of Special Considerations
If you are a non-resident earning gambling winnings in India, be aware of the implications of Double Taxation Avoidance Agreements (DTAA) with your home country.
This may allow for reduced tax rates or exemptions depending on the agreements in place.
Frequently Asked Questions
- How to save tax on winnings from online gambling in India?
To save tax, you can claim deductions wherever possible to lower overall tax liability or consult a tax professional who can provide more insights into your specific situation and wins.
- Are gambling winnings taxable in India?
Yes, gambling winnings are taxable in India at a flat rate of 30% under Section 115BB of the Income Tax Act.
- Is it possible to not pay taxes on gambling income in India?
No, it is not possible to avoid paying taxes on gambling income. All winnings over are subject to TDS, and you must report them in your Income Tax Returns.
- How are non-monetary gambling winnings taxed
Non-monetary gambling winnings in India are fully taxable at a flat rate of 30%, similar to cash winnings.They are taxed based on their market value when the award/ prize was won.
- How to avoid tax in Dream11?
Legally, you cannot avoid paying taxes on winnings from Dream11, or for that matter any other platform like RummyCircle, PokerBaazi, My11Circle etc. They are taxed at a flat rate of 30%. Consulting a tax professional for personalized advice may help in effective tax planning.
