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An Insight Into How India Taxes Online Gambling

Updated on by Mattias Fröbrant

Online gambling in India currently involves a 28% Goods and Services Tax (GST) on the total bet amount along with a 31.2% Tax Deducted at Source (TDS) on the winnings. Let’s talk about it in detail.

What’s Taxable?

When it comes to imposing taxes on online gaming, India has concocted what we can aptly term a ‘medley' framework. From gambling and betting to horse racing, lottery, online card games, crossword puzzles, quizzes, and even game shows playable online or those broadcast on TV – the country’s thrown everything into the mix!

The very definition of an online game in India is funny and lumps together games of skill and chance. It appears that India sees everything from the point of view of ‘gambling.’ Those who believe ‘online games’ include only the likes of League of Legends and Dota 2 or PUBG are in for a surprise.

The country believes that every gaming experience available over the web and accessible through a computer that involves a deposit made with the intention of earning winnings is an online game that should be taxed. Meanwhile, an online gaming intermediary (OGI), denotes a facilitator that presents a variety of these games.

How this definition holds for game shows like Kaun Banega Crorepati is beyond us. All we know is the winnings from this TV game show are taxable under the law and so are fantasy games played on platforms like Dream 11. Likewise, Rummy and Poker, too have made it to the umbrella term.

For now, we know nothing concrete about taxation rules specific to winnings earned from International online gambling sites. However, the definition doesn’t say anything about the origin of online games, which compels us to believe that winnings earned at an offshore casino or sports betting site could be subject to the same taxation framework.

Gambling activities in India might be subject to litigation, but the income tax regulations do not prevent anyone from earning income from such sources. All the income tax department wants you to do is pay your taxes, regardless of the source of income.

Therefore, we believe online gambling, too, falls under this taxable category. But how offshore gambling companies would be required to pay TDS or GST is still not clear. We are assuming the onus would be on the players to declare their gambling winnings and pay TDS while the bets they place would be GST-free.

Applicable Taxes on Online Gambling in India

Every Indian gambler pays two types of taxes – direct and indirect. The direct taxes are imposed on the winnings while the indirect taxes are imposed on the goods and services they buy in a gambling facility.

In 2023 alone, India managed to bring about two massively important taxation rules regarding the online gaming (rather, gambling) industry that have been widely talked about and even criticized. We’ve discussed the old and new stories below.

GST

Old Story

This GST system – an indirect tax – is commonly understood to be paid by consumers and then remitted to the government by the businesses providing goods and services. A Goods and Services Tax (GST) of 18% was levied on the Gross Gaming Revenue (GGR) generated by gambling businesses as part of their platform operations. 

To put it simply, gambling businesses in India that are obligated to pay GST would factor in this amount within the player's entry ticket cost or price of chips as a platform fee. For instance, if the entry ticket for a casino is priced at ₹1,000 and the casino's GGR is ₹10, this ₹10 would be integrated into the ticket cost itself.

Now, the GST that was earlier applicable on the GGR would amount to 18% of ₹10, which is ₹1.8. Subsequently, after deducting ₹10 and ₹1.8 from the entry ticket price of ₹1,000, you're left with ₹988.2. This remaining sum would contribute to the prize pool, from which the winnings will be paid out to the winners.

New Story

The 18% GST on GGR has now been revised to 28% GST on the full face value of bets. Accordingly, the new tax would be imposed on the entire ticket cost or price of chips and not just the platform fee. 

If we consider the aforementioned example, the ₹1,000 ticket would now attract 28%, which means ₹280 would be deducted from it and sent to the government. Assuming the platform fee would still be ₹10, the funds left for the prize pool would be ₹710.

Note

Indian online casinos that operate offshore are likely to be free from the GST rules. Players wouldn’t have to pay the 28% tax on their bet value. The money they deposit would be typically the money they get to play with.

TDS

Old Story

So far, India has levied tax at a flat rate of 30% on net gambling winnings (investment minus the money won) along with a 4% cess, making the total tax rate 31.2%. This is known as Tax Deducted at Souce (TDS), which is a direct tax calculated on ‘Income from Other Sources.’

The deducted amount isn’t eligible for any exemption or refund. Also, until now the deduction was applicable during the payment of winnings only if the net amount exceeded ₹10,000.

This means every time you win an amount more than ₹10,000, a TDS of 31.2% would be deducted. Additionally, a surcharge of 10% to 37% would be deducted based on the amount won. The latter varies as follows:

  • ₹50 lakh – ₹1 crore – 10%
  • ₹1 crore – ₹2 crore – 15%
  • ₹2 crore – ₹5 crore – 25%
  • ₹5 crore+ – 37%

For better clarity, we’ve put the old TDS and surcharge in this table below:

Net winnings₹0 – ₹10K₹10K – ₹50 lakh₹50 lakh – ₹1 crore₹1 crore – ₹2 crore₹2 crore – ₹5 crore₹5 crore+
31.2% TDSNot applicableApplicableApplicableApplicableApplicableApplicable
SurchargeNot applicableNot applicableApplicableApplicableApplicableApplicable
Tax to be deducted (approx)0₹3121 – ₹15.6 lakh₹15.6 lakh – ₹31.2 lakh₹31.2 lakh – ₹62.4 lakh₹62.4 lakh – ₹1.56 crore₹1.56 crore+
Total winnings after deduction (approx)₹0 – ₹10K₹6880 – ₹35.4 lakhs₹35.4 lakhs – ₹68.8 lakh₹68.8 lakh – ₹1.376 crore₹1.376 crore – ₹3.44 crore₹3.44 crore+

New Story

The regime for TDS on online gaming has now been revised. Accordingly, the threshold of ₹10,000 on online gaming winnings has been removed, although the rate remains the same. Also, the deduction would be applicable at the end of the financial year.

Effective April 1, 2023, winnings from what the Indian government deems ‘online games’ will attract 31.2% TDS for every rupee won, exclusive of the platform or entry fee, if any. The tax would be applicable even if the net amount won is less than ₹10,000 in a fiscal year.

To understand this with an example, let’s assume you played a gambling game for ₹1,000 and won ₹10,000. Your net winnings would be ₹10,000 – ₹1,000 = ₹9,000. As per the old TDS law, this amount would not be taxed.

However, as per the new law, the gambling platform will have to deduct 31.2% TDS of ₹9,000, which will eventually leave you with ₹9,000 – ₹2,808 = ₹6,192. The deducted amount of ₹2,808 will be sent to the government and you would not be able to claim a refund.

Also, the table for TDS taxation would now look something like this:

Net winnings₹0 – ₹10K₹10K – ₹50 lakh₹50 lakh – ₹1 crore₹1 crore – ₹2 crore₹2 crore – ₹5 crore₹5 crore+
31.2% TDSApplicableApplicableApplicableApplicableApplicableApplicable
SurchargeNot applicableNot applicableApplicableApplicableApplicableApplicable
Tax to be deducted (approx)₹0 – ₹3120₹3121 – ₹15.6 lakh₹15.6 lakh – ₹31.2 lakh₹31.2 lakh – ₹62.4 lakh₹62.4 lakh – ₹1.56 crore₹1.56 crore+
Total winnings after deduction (approx)₹0 – ₹6880₹6880 – ₹35.4 lakhs₹35.4 lakhs – ₹68.8 lakh₹68.8 lakh – ₹1.376 crore₹1.376 crore – ₹3.44 crore₹3.44 crore+

Note

Offshore casinos won’t be subject to the TDS rules as intensely as gambling businesses within India. So, the onus of declaring the winnings as Income from Other Sources and paying the applicable TDS is likely to be on the player.

Income Tax

The rest of the winnings clubbed with your annual income would be further taxed as income under the applicable Income Tax Slabs as follows:

Income SlabOld RegimeNew Regime
₹0 – ₹2.50 lakh0%0%
₹2.50 lakh – ₹3 lakh5%0%
₹3 lakh – ₹5 lakh5%5%
₹5 lakh – ₹6 lakh20%5%
₹6 lakh – ₹7.5 lakh20%10%
₹7.5 lakh – ₹9 lakh20%10%
₹9 lakh – ₹10 lakh20%15%
₹10 lakh – ₹12 lakh30%15%
₹12 lakh – ₹12.5 lakh30%20%
₹12.5 lakh – ₹15 lakh30%20%
₹15 lakh+30%30%

For instance, if you are left with ₹4 lakh in winnings after TDS and surcharge deduction in a fiscal year along with an annual income of ₹2 lakh, the total amount of ₹6 lakh would be taxed at 20% as per the old regime and 5% as per the new regime. Based on the regime you choose, you’d be eventually left with either ₹4,80,000 or ₹5,70,000.

Tax Deduction on Winnings Paid in Kind

When gambling or betting winnings are paid in kind, the TDS has to be paid to the government by deducting an amount equal to the market value of the non-cash item. For instance, if a car is paid out as a lottery prize, either the organizer of the lottery or the winner of the prize has to make arrangements for the TDS to be paid as per the market value of the car.

Tax Deduction on Winnings Paid in Part Cash and Part Kind

When winnings are paid out as a combination of cash and kind, the TDS computation is based on the cash portion of the prize and the market value of the non-cash item.

This involves calculating the TDS amount and subtracting it from the cash portion of the prize before paying it out to the winner. If the cash prize isn't adequate to offset the entire TDS amount, either the winner or the gambling operator or organizer must address the shortfall in tax payment.

Double Taxation Avoidance Agreement (DTAA)

Players engaging in gambling and betting on overseas online casinos and sportsbooks should know that they may be covered by the Double Taxation Avoidance Agreement (DTAA).

Under this provision, they can avoid paying TDS twice on their winnings – once in the country where the income originates and again in their own residential country. As of now, India has established the DTAA with 85 different countries globally.

Mattias Fröbrant is a passionate iGaming journalist renowned for his comprehensive reviews of over 300 gambling sites in India. With a remarkable 17-year gambling experience and a background working for industry giants like Betsson Group, Mattias has earned recognition as a leading expert in the Indian online gambling field.

At GamblingBaba, Mattias’s commitment to providing accurate and easily digestible information shines through meticulously researched reviews, guides, and news articles. His strong belief in honesty and transparency ensures that readers receive the most reliable insights on the Indian gambling landscape.

To get in touch with Mattias, connect via Linkedin.

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