Playing in an online casino is a favorite pastime of many. All you have to do is check out Indian online casino list prepared by CasinoHEX.in or any other similar website on a regular basis, and you’ll learn how new casinos spring up like mushrooms. Every day there is a new casino with a promise of great winning opportunities.
But, what happens when you actually win? Many casino punters live without knowing how all their winnings are taxable. This doesn’t apply only to Indian casino players, but players all across the globe as not a single country considers gambling profits as a non-taxable category.
Online Casinos vs. Land-Based Casinos
The Indian gambling market is somewhat specific, as you can legally gamble in onshore venues only in three states: Goa, Sikkim, and Daman. On the other hand, online casinos are widely available, but not regulated by Indian authorities. It is not illegal to gamble in online casinos who are regulated in other territories, but the lack of regulation in the online casino industry can definitely leave many winners puzzled. Should they pay taxes or not?
How to Pay Taxes on Online Casino Winnings in India?
Gamblers must be aware of one thing: even though online casinos are not recognized and provided with Indian gambling licenses, all winnings are still a type of income.
All incomes are defined per the Income Tax Act from 1961. Section 115BB defines gambling activities that can result in taxable winnings. Such are the lottery, game shows, any type of card game, crosswords and races (including horse racing), as well as “gambling or betting of any form or nature whatsoever”. The tax rate is 30% flat.
According to the Section 194B of the Income Tax Act, all winnings and prizes worth over 10 thousand rupees will be deducted 30% tax at source, thus meaning that your online casino should deduct the amount before the withdrawal.
The Income Tax Act also states how both incomes from legal and illegal activities are subjected to taxing. So, even though there are no online casinos licensed by Indian authorities, and Indian tax service considers such activities illegal, but not forbidden, every deposit to your bank account coming from such a venue should be taxed at a rate of 30%.
Any income coming from an online casino or any other form of gambling should be listed in the annual tax report. Everyone who makes an income in India is subject to income tax, both residents and non-residents. Non-residents are obliged to pay taxes only on their Indian income.
eWallets and Online Payment Methods as Tax-Free Havens?
All these tax requirements are imposed on bank accounts and deposits in India. This is only one of the reasons why many punters avoid bank wire withdrawals. Not only are they expensive and slow, but they are also directly subjected to tax.
Many players believe how income that ends up on the eWallet is not taxable. But, unfortunately, it is subjected to the same laws and regulations as any bank account in India. According to the Income Tax Act, 1961, eWallet payments are defined as ‘income from other sources’ and are covered under section 56(2). Still, any transfer under the amount of 50,000 INR is considered to be a gift and is not taxable. All transfers that exceed this amount must be categorized either as ‘income from other sources’ or as ‘profits and gains from business or profession’.
As always, theory and practice are two completely different things. In theory, every casino punter should report winnings received on the eWallet, but considering how many eWallets there are, Indian tax services simply can’t keep up with all of them. Many Indian punters simply use less known wallets to keep their winnings intact, as they know that Indian bureaucracy is slow. Some even rationalize and say that a government that hasn’t made legal and licensed online casinos possible, shouldn’t be collecting taxes on profits made with such companies. We do not encourage such behavior, and strongly suggest reporting all winnings.
Conclusion – Grey Zone for Casino Winners
The law is more than clear – any income coming from gambling activities is taxable at the rate of 30%. It is in effect for both online and land-based casinos, but there are still many punters who disagree with these policies and try to find a way to avoid paying taxes when it comes to online casinos.
Considering how Indian authorities don’t provide any licenses, it can be concluded how they rely on the morale of each individual playing in them to report their winnings. But with the rise of online payment methods and electronic banks, more and more players simply decide to avoid taxes and use their money exclusively online, thus avoiding paying taxes. At least, for now.