Are Winnings from Online Betting Taxable in India?

[Khushbok Jain]

Following an increasing internet penetration in India, more and more Indians are beginning to make use of so-called online betting sites which allow users to place bets on popular sporting events from India and around the world and potentially win money.

As with all activities that have an element of income-earning potential, the inevitable questions of taxation arise. 

Although online betting is mostly just a hobby which is practised for purposes of entertainment, it is theoretically possible to earn money through online betting, and some professional players do actually manage to earn a living through this activity.

So the question is, do online betting earnings incur taxation in India? Is it taxed like regular income or does it fall under a separate tax bracket? That is what we will discuss in this article.

Increasingly, Indians are looking at options to diversify their income and also engage in new hobbies from their homes. The ease of internet access and the rise in the number of online betting options have certainly made this possible. In fact, 40% of internet users in India have tried their hand at online gambling. 

Even though the laws governing online betting in India are vague, it is possible for Indian players to bet legally and securely. However, it is important to note that winnings from online betting are fully taxable per the Income Tax Department. 

Online Betting Income Tax Rate in India

Section 115BB of the Income Tax Act details the tax implications on income earned from online betting. Per this provision, the winning amount attracts a tax at a flat rate of 30% excluding cess. The net rate with cess included adds up to 31.2%.

Every Indian tax payer looks for tax exemption benefits. However, none of the benefits are applicable to income generated from online betting. 

Benefits like house rent allowance, leave travel concession, home loans rebate, etc duly detailed under the various sections of the Income Tax Act cannot be used on the taxable amount of online betting. Moreover, the tax slab rates also do not apply to this income. 

Tax Laws Apply to Online Betting Providers Too

Betting websites in India have to follow certain rules when paying out winning amounts to players. 

First of all, if a single payout amount exceeds INR ₹ 10,000, the tax amount must be deducted at source. For example, if the payout prize amounts to INR ₹ 50,000, the player will receive only INR ₹ 34,400 due to a tax deduction at source (TDS) of 31.2%.

This means that the player must file his earnings as tax deducted at source when filing his annual taxes.

Occasionally, online betting sites may give out physical prizes such as mobile phones, cars, tech gadgets, etc. In these cases, the betting site is liable to pay the tax before releasing the prize to the winner. 

The tax amount is calculated based on the market value of the physical item disbursed. Often, the betting site will recover the tax amount from the prize winner.

Best Tax Practices for Punters in India

Always remember to include earnings from online betting when filing your taxes!

It is mandatory for bettors to report the income from online betting when filing their income tax returns (ITR). It is highly recommended that bettors disclose the exact income earned using an online betting site when filing the tax reports.