Online Gambling Tax Status in 2020

Online Gambling Tax Status -Taxscan

In the past few years, there have been several discussions along the lines of regulation of gambling laws in India. While some people support a complete prohibition of the activity, others advocate stringent rules in place for the safety of the players gambling online. Unfortunately, there has been no clear decision in this regard from the government and India continues to follow the ancient laws affixed back in the mid-1800s by the British government. Nevertheless, despite vagueness in the general laws, there are essential regulations in place to regulate the rewards achieved by the players through gambling platforms. 

While there are no benefits in particular associated with income through online gambling, there are, however, mandatory taxes on different rewards. Let’s take a look at what these tax laws have to offer for gambling enthusiasts. 

What are Online Casinos?

In the current age, several countries have imposed a ban on brick and mortar or physical casinos. People need to travel to different geographical locations to enjoy a spin or two of their favourite gambling games. 

Fortunately, with the widespread use of the internet, casino companies have started functioning online via personalized casino websites. Such websites offer an enthralling environment to play in. They boast a variety of online gambling games sourced from top game developers across the world such as Microgaming, NetEnt, Play N’Go, Evolution Gaming, etc. They also have an affiliated gambling license that makes them legal in different countries or states. The most popular licensing authorities are the UK Gambling Commission, Curacao Gambling Authority, Malta Gaming Council, etc. The primary function of these licensing bodies is to ensure that the gambling platform adheres to all the safety guidelines and pre-requisites to make it secure and reliable for the players. 

Apart from this, such platforms provide the players with the opportunity to win real rewards in cash and kind. The transactions on licensed gambling platforms are seamless and safe. They also offer various bonuses to keep the players engaged and loyal. 

Taxation on Rewards in Cash

Surveys conducted in 2020 have revealed that there are approximately 300 million online gamers in India. During the lockdown, this number has already witnessed 100%. It is only sensible to assume that the current number is to increase rapidly in the coming years. While online gambling becomes a popular choice among players, the cash rewards won through such means have also increased aggressively. This calls for a proper measure to regulate the income of the players. Fortunately, this provision was already introduced in the year 1995 in the Income Tax Act of India, allowing taxation on income from unannounced sources. 

According to Section 115BB of the Income Tax Act, all online gambling profits are taxable. The section, named ‘Income From Other Sources’ requires tax to be filed against any profits made through online gambling, lottery, sports betting, online gaming, etc. The tax levied on such income is 30% excluding the cess. The net amount totals to 31.2%, including cess. This tax has no regard for the amount won or games played. It means that irrespective of how much you win, you must pay a 30% tax on it. 

Apart from this, if a player wins an amount above Rs. 10,000, it is subject to TDS which needs to be deducted by the gambling platform. This law falls under the widely discussed Section 194B.

Taxation on Rewards in Kind

Several online casinos offer rewards in kind such as gift hampers, paid vacations, flight tickets, etc. These are often promotional or rewarded to loyal or VIP players. If you receive any such reward, you need to disclose its market rate. Such rewards will be subject to TDS as well. 

Tax Filing

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. 

Benefits Offered

According to the Income Tax Act, Section 115BB, and Section 194B, there are absolutely no benefits, expenditures, or exemptions for income through online gambling. 

Conclusively, while the income from online casinos is taxable, there are no benefits provided by the government as of now. However, considering the popularity of online casinos, we might be able to see some positive changes in the paradigm and enjoy a new set of regulations for online gambling. 

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