How to Calculate Taxes on Online Casino Winnings in India?

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In the past 10 years, the online casino industry in India has seen a massive surge in the number of players. 

This has been brought about by the fact that hundreds of millions of Indians have gotten access to high-speed internet connectivity at relatively affordable costs, allowing them to access online casinos that were previously inaccessible.

The question surrounding the legality of online casinos in India still remains, however, international online casinos have found ways (read: legal loopholes) to offer their services to Indian players in a legal way.

However, from the perspective of the player, it is important to be aware of the taxes that the winnings from an online casino attract.

Taxes on Online Casino in India

All earnings that you make from an online casino are considered a part of your annual income. This income is fully taxable in all Indian states. This income must be declared under the heading “Income from other sources” in your annual tax report. 

Complete tax details about such income is covered under section 115BB of the Income Tax Act. This section details the income earned on winnings from betting, casinos, and similar sources.

Earnings from online casinos are taxed at a flat rate of 30% irrespective of the tax bracket the taxpayer falls under. No exemptions are applicable to this amount. It is legally required to disclose these earnings during the annual tax filing.

It is important to note that an additional cess is levied over and above this tax. The net rate after cess sums to roughly 31.2%. The cess is set at 4% and it is added to the due tax payable by persons whose income is liable for income tax. 

For gambling operators that are allowed to legally operate and pay taxes in India (such as Indian rummy sites), the tax amount is automatically deducted when the player makes a withdrawal from the site as part of the Tax Deducted at Source (TDS) policy. 

For instance, if your winnings on a rummy site amount to Rs. 20,000, you will receive Rs. 13, 760 because the winning amount entails a tax deduction TDS of 31.2% under section 194B.

However, for international online casinos with no legal presence in India, the player is given the full winning amount when he makes a withdrawal. This means that he alone is responsible for reporting the winnings as income on his annual tax report.

The More You Win, the More You Pay

According to the tax rules in India, additional surcharges apply to winnings of more than Rs. 50 lakhs.

Winning amounts in excess of Rs. 50 lakh attracts a surcharge of 10% over the normal rate. That makes it 33%, excluding cess. The total tax rate after adding the cess amounts to 34.32%.

Winnings that exceed Rs. 1 crore, attract a surcharge of 15% over the normal rate. Post addition of cess, the total tax rate comes to 35.92%. 

Take Your Tax Advice From the Experts

To play at an online casino legally, it is important to disclose the exact income from online casinos. This income must be reported when filing your income tax returns (ITR).

It is important to pay your taxes on time if the taxable amount was not deducted at the source. This will help you keep worries at bay and avoid a fine from the tax department.

If you need advice related to paying taxes on your income from online gambling, make sure you contact a chartered account such as who will be able to give you the most correct tax advice on the subject.

Confused about complicated laws? Take our GST consultation services to get your issues solved from GST experts. Click here to know more.

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