In India, where many are drawn to the excitement of online casino betting, the issue of taxes on winnings is a common concern.
It's essential to understand the tax implications of your good fortune to prevent any unexpected complications later in the journey.
Continue reading below for a detailed guide about Tax on Casino Winnings in India.
Are Casino Winnings Taxable?
Yes, in India, winnings from casino games are considered income and are subject to tax under Section 115BB of the Income Tax Act, 1961.
This applies to winnings from both physical casinos and online casino platforms. The tax rate is a flat 30% on the entire amount you win, irrespective of your total income or tax bracket.
In some cases, casinos are required to deduct TDS on large winnings before paying out the prize money. The TDS rate on casino winnings is typically 30%, and the remaining amount is paid to the winner.
However, the tax liability may vary based on the individual's total income and applicable deductions.
According to the 2023 Budget circular, online gaming entities are mandated to deduct a 30% tax before disbursing winnings, particularly when the winnings surpass the ₹100 threshold.
These amendments took effect on April 1, 2023. The tax calculation is based on the net winnings of the user, determined as the disparity between the withdrawn amount and the deposited sum in the user's account.
Who Pays the Tax?
It's your responsibility to declare and pay the tax on your casino winnings. The casino doesn't automatically deduct the tax at the source (In the case of online casinos, TDS is deducted before the amount gets disbursed to your account).
Even if a brick-and-mortar casino issues a certificate acknowledging your winnings, the responsibility to include this income in your yearly tax return, specifically under the “Income from Other Sources” category, lies with you.
Examples of Winnings Subject to Tax
Until now, you've understood that you're responsible for paying taxes on your winnings.
Now, let's break down the specific parts of casino winnings that require you to fulfill tax obligations:
- Money won on any casino game like roulette, blackjack, slots, etc.
- Winnings from poker tournaments, if considered primarily games of chance.
- Prizes and bonuses received from online casino platforms.
- Any in-kind rewards exchanged for cash.
Points to Consider
Apart from the points mentioned above, there are certain things that you should be aware of before playing at a casino.
These are important for you as and when you file the Income Tax Return:
- Surcharges: Winnings exceeding Rs. 50 lakhs attract a 10% surcharge, making the effective tax rate 33%, and winnings exceeding Rs. 1 crore attract a 15% surcharge, pushing the effective rate to 35.92%.
- No Deductions: Unlike other income sources, you can't claim any deductions or expenses incurred while gambling against your casino winnings.
- No Double Tax: If you use your winnings to place further bets and not withdraw them, no additional tax is levied on those bets. This avoids double taxation.
- Responsibility of Proof: The onus lies on you to prove the amount of your winnings. Keep relevant documentation like casino receipts, transaction statements, and play history records to substantiate your claims.
To make things simple on how much you need to pay in taxes, look at the following points.
This will give you a clearer idea:
- Scenario 1: You win Rs. 10,000 at a casino. You'll be liable to pay Rs. 3,000 in tax (10,000 x 30%).
- Scenario 2: Your lucky streak continues, and you win Rs. 60 lakhs. You'll owe Rs. 21 lakhs in tax (60 lakhs x 30% + 6 lakhs surcharge).
- Scenario 3: If you bag a jackpot of Rs. 2 crores. Be prepared to pay taxes of Rs. 71.84 lakhs (2 crores x 30% + 30 lakhs surcharge + 12.84 lakhs additional surcharge).
Tips for Responsible Gambling and Tax Compliance
Failing to declare your casino winnings can lead to penalties and interest charges. In severe cases, you might also face legal consequences such as jail or other punishments.
Irrespective of whether you are a newbie or an experienced gambler, there are certain things that you should always keep in mind for a smooth journey, which are as follows:
- Keep Records: Maintain a record of your winnings and losses to accurately calculate your taxable income.
- Seek Professional Advice: Consulting a tax advisor can help you navigate the nuances of reporting casino winnings and ensure compliance.
- Gamble Responsibly: Remember, gambling should be for entertainment, not a financial strategy. Prioritize responsible gambling practices to avoid falling into debt or chasing losses.