Will the Legislation of Online Betting Improve India’s Tax Revenues?

Legislation of Online Betting - India’s Tax Revenues - Taxscan

Gambling has always been a part of the Indian culture especially that this country is a big fan of sports like cricket. Sports betting is something that is practiced throughout the country and this activity falls under section 115BB of the Income Tax Act.

According to the law, if a person wins at any gambling activity, the winning amount will be taxed at a flat rate of 30 percent excluding cess. The net rate that comes after cess is then 3.2 percent. Since this activity falls under the said section of the law, income tax exemption and slab rate are not applicable here.

The Legality of Gambling in India

Generally, gambling is illegal in most of India but this is still widely practiced throughout the country because of certain loopholes like how online gambling is neither legal nor illegal for the locals. The only places where gambling is completely legal here are Goa, Sikkim, and Daman.

Big gambling fans would travel to these states to visit floating casinos like Casino Deltin Royale, Casino Deltin Jaqk, and Casino Pride. The biggest celebrities in the country are also known to facilitate grand gambling events.

Still, people don’t have to go to these places to play their favorite casino games or place bets on their favorite sports. Many would resort to online gambling because this is the easiest and most convenient way to enjoy this activity.  It’s easy to place bets online. Locals may use Neteller, Astropay & Skrill to deposit and withdraw from the betting sites in India.

While local operations of online casinos are prohibited outside Sikkim which has a legal online lottery, people are still free to place their bets outside the country or with offshore online casinos. Offshore casinos and bookies are allowed to offer their services to the Indian locals and the only thing they have to make sure is that they offer Indian Rupees as a payment option to the players. Some of the popular online casinos in India are 22Bet, Betway, Royal Panda Casino, and Europa Casino.

Tax on Online Gambling

Even if online gambling is still in its infancy in the country, tax laws still apply to this activity. It doesn’t matter if you were accessing the online sites inside or outside the states with legal gambling. These winnings will still be subject to tax.

TDS

When it comes to online lottery games with prizes that aren’t cash, things are a bit different. If you win a car, your prize distributor can either make you pay the GST tax of 31.2 percent of the car’s market value or they pay this amount themselves.

Tax Potential if Online Gambling Is Regulated

Overall, online gambling isn’t exactly regulated in the country. The industry is still young and the law is still quite easy on the operators. However, what’s worth pointing out is that India is losing a lot of tax revenues by allowing offshore casinos to take bets from the locals.

KPMG reported in 2019 that the size of the Indian gambling market was already able to reach over 130 billion US dollars. Today, this should already be valued at around 15 lakh crore. There were also reports that gambling accounts for 7.5 percent of India’s GDP.

According to reports, India is missing out on a lot of potential revenues based on how big the gambling industry isin the country. Based on how big the industry is this year, India is set to lose over 393 million US dollars with a tax rate of 30 percent. By 2024, considering how big the local gambling sector is, India would then lose over 1.1 billion US dollars.

India is losing so many potential revenues from overseas casinos and bookies. Aside from that, there is a missing opportunity for job creation. If India starts to regulate and allow local businesses to run online casinos, it has the potential to create around 100,000 jobs for the locals.

These apparent losses are not exactly new knowledge. For other countries that don’t regulate online gambling, these are also the losses that are usually pointed out. Now, will India ever consider legalizing online gambling? It’s hard to say for now. This legislation will require a lot of time and resources to be properly done. However, it’s not impossible that India eventually will. 

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