17 Dec 2011

Taxes on gambling: Winnings liable to be taxed, additional levies on casino owners

One important question that people have asked me is whether winnings from casinos and betting can be taxed and if so what would be the quantum of tax to be paid.

The answer to this question lies in Section 115BB of the Income Tax Act which lays down the rate of tax for winnings of any lottery, card games, horse-race, crossword puzzle or any other gambling or betting activity to be thirty per cent (30%).

Further, in terms of Section 194B of the Income Tax Act, for any prize of more than ten thousand rupees , tax has to be deducted at source (TDS) by the person awarding the prize.

Again it must be noted that since for the purposes of computing taxes, there is no difference between a legal and an illegal activity. Thus even illegal betting and gambling winnings would be liable to be taxed under this Section.

Also, though remittances for the purpose of gambling are prohibited under the Foreign Exchange Management (Current Account Transactions) Rules, 2000 (Schedule I), since no action is taken against betting and gambling on foreign gaming websites through Indian bank accounts, any winnings remitted in Indian bank account though illegal could still be taxed at the rate of 30% under the Income Tax Act.

Additionally it would again be reiterated that if gambling winnings are remitted in India from abroad, one could face penalties of up to thrice the remitted amount under Section 13 of the Foreign Exchange Management Act (FEMA) 2000.

Levies and taxes for casinos

Casino operators in Goa (both onshore and off-shore) have to pay a fee of 10% of the total value of chips sold or receipts from gaming machines. Additionally, offshore casinos have to pay a tax of Rs. 2000/- on admission of one person, while onshore casinos have to pay a Rs. 500/- tax on an individual’s entry.

Other than these levies, according to a Firstpost report, the Goa government charges a Rs. 5 crore/ year license fee per offshore casino.

Casinos in Sikkim have to pay a Rs. 5 crore fee for obtaining a five year license. Additionally they also have to pay a tax of 10% (or Rs. 1 crore, whichever is higher) on the total gaming revenue. The tax rate gets enhanced to 15% from the third year of operation of the casino.

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