Major Goa casinos have recently changed their in-house policy on tournament winnings and will now deduct a 30% Tax Deducted at Source (TDS) on tournament winnings in compliance with Section 194B of the Income Tax Act, 1961. (See our earlier report here.)
Tanmaya Nanda, Public Relations Officer of Delta Corp, a public limited company which owns Casino Royale and Casino Caravela, two major offshore casinos in Goa confirmed that TDS is being deducted on poker and other tournaments. Regular players at Casino Carnival, another major offshore casino in Goa also confirmed that TDS is now being deducted on winnings.
It still remains a mystery as to why TDS was not deducted on winnings on tournaments until recently and why cash games are still not subject to tax deductions. The complex secrecy surrounding this glaring omission by casinos and its implications will be dealt in a subsequent post; however poker enthusiasts and insiders familiar with the developments believe that such a move would drive away regular gamblers as it would severely dent the amount of winnings/prizes that casinos usually offer.
Thus, if a player wins Rs. 50 lakhs in a poker tournament with a buy-in of Rs. 1 lakh, it would mean that around Rs. 16.30 lakhs would be straight-away deducted as TDS and the winner would be awarded the remaining Rs. 34.70 lakhs (which would amount to a reduced incentive and greater scrutiny).
Bharat Agarwalla, Director of India Poker Series and a regular organiser of poker events in Goa casinos believes that it is necessary to educate players about the importance of deducting taxes as per the laws in India. Agarwalla further adds, Tournament organisers are merely complying with the applicable laws by deducting TDS. Such taxes have global precedence and are deducted at source even in USA (formWG-2 as per IRS guidelines in USA requires withholding of 28% taxes in case of winnings over $6,000 and this varies for different games) and other European nations on poker tournaments. The rate of tax is certainly high but we can only hope that the government changes the rules and allows set-offs for losses/expenses and reduces the rate of TDS (or abolishes TDS) especially for poker…we can only urge the government for reforms and reduction of taxes…
In a similar but unconnected development the Goa government notified guidelines for preventing money-laundering and black money in casinos following an amendment in the license terms and conditions for casinos in 2012 . (See our earlier report here.)
The Anti Money Laundering and Financing of Terrorism Guidelines, 2013 introduced by the government require casinos to follow stringent Know-Your Customer (KYC) norms for gamblers and verify sources of funds of Politically Exposed Persons (PEP) such as senior bureaucrats, politicians, judges etc.
Further, cash transactions above ten lakh rupees would have to be reported to the Financial Intelligence Unit (FIU) and suspicious transactions to circumvent this threshold also have to be reported to the FIU.
These guidelines are important measures in curtailing black money and money from criminal activities and come amidst concerns raised by politicians and civil society organisations regarding the role of black money in Goa casinos. However, experts closely following the gaming industry believe that such stringent guidelines preventing large cash transactions may also have an adverse impact on the revenue flows and business done by casinos.