Are winnings from online betting apps taxed?

Team Udayavani, Sep 7, 2022, 3:00 PM IST

Representative Image (Source: iStock)

Since gambling is so popular in India the IT department in India has set rules on every activity where there is the involvement of money, and there are provisions for the income earned from online betting and gambling source.

Though there are no clear laws for online betting in India. Hence, the Betting Apps which are based outside India and accept Indian rupees can be considered legal for Indian players. The Public Gambling Act of 1867 throws some highlights on legal betting aspects and mostly revolves around the fact if the game qualifies as a game of skill or a game of chance. The government of India has allowed each state to decide on their own rules for gambling in India.

There are a ton of sports betting apps in India since Indians love to bet on sports like cricket and kabaddi.  Though cricket is the most loved and famous sport in India. However, it is not the only sport people bet on. While betting is quite common on sports like football and horse racing, betting on politics, weather, dice, or teen patti is also not way behind. There has also been a positive trend in betting since the lockdown as people found more time for leisure and entertainment and the online betting and gambling sectors benefited quite much.

But we need to sort the diversity of income since most people also have a regular salary-based income too. Since online betting and gambling is now advancing its roots in India it is of utter importance to understand what happens to the winnings or earnings that you make from online betting platforms.

What Does the Income Tax Act Say?

The IT law clearly states that there is no difference between the income from fantasy games and poker. Any income by way of winnings from a card game or games of any sort is taxable at a flat rate of 30% plus applicable surcharge and cess, There is also no account for any deductions or the basic exemption limit.

How the Earnings From Betting Apps Are Taxed?

Section 115BB of the Income Tax Act regulates the income earned from online gaming. This comes under the head ‘Income from Other Sources’ while filing income tax returns. The winnings from online gaming, poker, casino etc all count towards this. Let us look at some of the rules stated under section 115BB.

• The money earned from online gaming is subject to be considered as Income from Other Sources’ while filing (ITR). This income will be taxed as per the provisions of the Income Tax Act.
• This income is taxed at a flat rate of 30% excluding cess without taking into account the basic exemption limit. The amount that you pay after including the cess is 31.2%.
• For instance, if an individual’s annual income is Rs 1 lakh and if he has earned Rs 50,000 from online gaming, then his total income comes to Rs 1.5 lakh, which is below the basic exemption limit of Rs 2.5 lakh. But still, the individual has to pay tax on the Rs 50,000 including cess.
• Further, no deduction or expenditure is allowed to be claimed against such income.

Are the Earnings Liable for TDS Deduction?

• If the prize money exceeds Rs 10,000 it is liable for a TDS deduction @ 30%.
• It does not matter if the income falls under the limits of the tax table or not.
• If the amount exceeds INR10,000 the distributor is liable to deduct tax at the time of payment.
• The receiver always needs to reveal this amount while filing his annual ITR, even if the entity distributing the prize money has deducted TDS.
• If the prize is received as a gift, then tax will be applicable on the market value of the prize given though that TDS is deducted before transferring the prize to the winner.

Conclusion

In summary, income from online betting is taxable in India. As we have advanced in technology the online betting apps in India have made it possible for betters to bet legally and securely ensuring full compliance with the income tax laws.

Disclaimer: Online gaming involves an element of financial risk and may be addictive. Please play responsibly and at your own risk.