What are the tax implications of online gambling?

What are the tax implications of online gambling?

Gambling or betting is mostly illegal India. There is no any unified law on gambling. The constitution of India empowers each state to make its own gambling law. But even if it is legal or illegal the taxpayer is not free from paying the tax, he requires to pay tax on the same at higher tax rates.

What is mean by Online Gambling?

Gambling is also known as betting. It is wagering of money or something of value on an event with an uncertain outcome with the primary intent of winning money or material goods.

In simple terms, online gambling means betting on casinos or sports via the internet. It is also known as internet gambling or e-gambling. It includes virtual poker, online casino, betting on sports, etc.

How online gambling appeared?

In this current era, several countries have banned physical casinos. People need to travel to different geographical locations to enjoy a spin or their favorite gambling games. Through the wide spread of technology, casino companies have started online casinos via personalized casino websites. Income from online betting is taxable in India. With the technological advancements online betting sites made it possible for betters to bet legally and securely ensuring full compliance with income tax laws.

What is the tax rate of online gambling?

Section 115BB of the Income Tax act, 1961, specifies that any winnings from lotteries, crossword puzzles, race betting, card games, online rummy and other games as well as gambling of any form is taxed at a flat rate of 30%. The tax rate after adding cess amounts to 31.2%.

This tax rule is applicable to all online gambling winnings, regardless of an individual’s total income, and no exemptions are given to the income which is earned from gambling. The income from gambling falls under the head, “Income from Other Sources”. This tax has no regard for the amount won or games played. It means that irrespective of how much you win, you have to pay tax at the rate of 30% even if the amount is small.

What is the tax implication if reward received in cash?

If a player receives the reward in cash, then you have to pay tax at the rate of 30% on it. If the amount received is above Rs 10,000/-, it is subject to TDS which needs to be deducted by the gambling platform.

What is the tax implication if reward received in kind?

Several casinos offer rewards in kind of customized gift hampers, paid vacations, vehicle, etc.to their VIP players to promote their online platform. If you receive any such reward you need to disclose its market price and have to pay tax on the same. Such rewards are subject to TDS as well.

Filing of gambling income

While filing income tax for your winnings through online gambling, it is mandatory to disclose the amount won and TDS deducted exclusively. This needs to be followed after you provide your PAN, bank details, and address to the online gambling platform.
There are no any exemptions, tax deductions for income through online gambling.

Amount to be considered as gambling income

Tax is required to be paid on winnings amount. It is not required to be paid on number of transactions entered.

Mr. Rahul plays online casinos and has done transaction of Rs 50 lakhs but has earned only Rs 10 lakhs. Therefore, tax is required to be paid on 10lacs and not on Rs 50 lakhs.

Conclusion

Income from online gambling is taxable in India. With the modern technology, online betting sites and applications in India have made it possible for betters to bet legally and securely ensuring full compliance with the income tax laws.

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