Taxes on Poker Winnings
The Section 194B of Income Tax Act requires every poker player live or online to pay 30%+ 0.9% (Education cess tax is 3% on tax) totalling to 30.9% income tax on the total net income generated in a year.
It is necessary to note that a winning of over Rs. 10,000 attracts a TDS (Tax deduction at Source) of 30.9%. However, please note that the TDS is a tax that is deducted at the source, while Income tax return is the one you file at the end of the financial year, and they are two different things.
TDS is deducted when you have a winning of over Rs. 10,000 in a single game or tournament or single table. If you’re playing online poker, it is then mandatory for the site to deduct 30.9% of TDS on the total winning, before they reach you. Once you receive the amount after the tax deduction, you’re not liable to pay any other tax on the amount received, since you’ve already paid the TDS.
If you’re playing live and the TDS is not deducted from your winnings, then you’re obliged to file income tax of 30.9% on your winnings within the 30 days of receiving your winnings.
Tax Deduction At Source Certificate
However, it should be noted that the sites that deduct your TDS will provide you with the certificate as a proof of the same. There may be cases where the companies don’t deduct the taxes on the winnings as a part of the promotional offer. Such companies are then required to submit TDS on player’s behalf from its budget, and the company is further required to provide the player with the TDS certificates.
Therefore, in the case of no deduction of taxes in the player’s earning, it is the liability of the company to finish the fiscal procedure as per the IT Act. Players should be careful of any sites making claims of waving off your TDS and then doesn’t provide you with your TDS certificate is involved in illegal practices which will attract legal implications.
The gaming site or the company may be prosecuted for not deducting TDS. The game organiser would require paying the full TDS along with interest and other penalties, as under the Sections 201(1A), 221, 276B of the Income Tax. If any individual is found in nonadherence to the said sections, it may lead to seven years in prison and may even attract some penalties.
TDS deductions of every individual can be accessed by the people in form 26AS and use for filing Income Tax.
Reformations and the approaching changes
As the poker industry in India is on the rise, it’s time we need reform in our taxes in this industry. In the very regard, the Easwar committee report suggests increasing the TDS threshold to be Rs. 15,000 from the current value of Rs.10,000.
The recommended limit displays the deplorable state of poker and other games, where the limit desperately needs to be revised to a minimum level of Rs. 50,000. The suggestion was given by PK Jain, who is the head of operations of Sachar Gaming Pvt. Ltd. Jain has also filed a petition for lowering the TDS to 10-15% on earnings from skill games, with the bracket starting at Rs. 50,000.
India is at the stage in Poker, where any change would be a welcoming one. The government should consider the losses incurred by the poker player before calculating the final taxes. It should be similar to the provision for share traders. It’s time that the growing skill game market gets a transparent and industry oriented taxation system.
A committee headed by the Justice RV Easwar was formed by the government to review the current income tax provisions and suggest ways to simplify them. The committee recommended increasing the threshold limit on winnings from gambling, horse racing, lottery games, card games, crossword puzzle etc. from the previous Rs. 10,000 to Rs. 15,000.
The committee stated on increasing the TDS threshold limit; “Considering the importance of the long overdue revision of these puny limits, the Committee has recommended suitable hikes in such threshold limits.”
Recommendations of the committee
According to the further recommendations of the committee, the winnings from the horse racing should be merged with the section 194B of the Income Tax Act which would simplify things and make them a little less complicated.
The committee also recommended a flat tax of 30% deduction on section 194B. If the government adopts the recommendations of the committee, it surely will bring some respite for the poker, rummy and other skill games players in India some respite. However, it cannot be expected to give the players some relief from the exorbitant tax rates recommended at 30%, where there is no scope of lowered tax rates by the government.
Though the committee seems to burden the tax payers further, the primary aim of the government was to study, understand and identify the provisions of the existing act, with the help of the Easwar committee. The committee segregated its recommendations into two broad segments.
1) Those that could be exercised through administrative instructions and circulars.
2) Those that required amendments for the act.
The overall concept of creating the committee is given below.
- a) For simplifying the existing laws,
- b) paving the way for seamless business running.
- c) To suggest and recommend ways and measures to reform tax laws.
- d) To recommend changes and amendments in the existing laws, if necessary.
With the rules implementations based on the recommendation, India would see some form of reform and acceptance towards the gaming industry. In the coming time, we may broaden our perspective and accept the skill game industry more openly. With strict laws and high taxes, it surely is discouraging for the players. Seeing how the poker industry is growing across the globe, we are hopeful of the coming times bringing in with them some good news for Indian poker players.