Players in India will be hit with 30% online gambling tax levies on any winnings / profits during the tax year from April to March! (Photo by Magda Ehlers on Pixabay)
The days of players paying tax on online gambling winnings in the UK, but in India, players are subject to taxes and any online winnings per annum will soon have a 30% levy applied.
These latest tax rates come via news spilling out of India subsequent to the release of the country’s latest Finance Bill 2023, which amends or adds rules under the Income Tax Act. As for the changes, these were part of the Indian Budget 2023.
With the new rules in place, India’s government will quash the ₹10,000 tax-free limit with the sole aim of putting a stop to splitting winnings paid out to players so they can avoid the threshold. That same threshold will apply to online gambling by Q3 2023 as will a 30% tax rate to any profits made from gambling in a tax year, which runs from 1 April to 31 March.
Quite how the new rules will affect winnings earned by playing at casinos not obliged to pay tax in the country I do not know. I would say not at all, which is all the more reason for India to continue its current path of introducing a new online gambling authority in India. That said, some casinos may see the benefit of working with the government of India as this would work in their favour when licensing does come into play.
How likely is an online gambling framework in India? We have already seen the responsibility of forming a regulatory framework assigned to the Ministry of Electronics and Information Technology. Therefore, it seems reasonable to assume that it is not a matter of if, but when India brings in an online gambling licensing regime.
How will the new tax bill benefit the government’s fiscal budget?
According to some figures floating around out there, India’s overall gambling industry will be worth $5 billion (₹ 413 billion) by 2025. There are other figures that already put the market at this number with the inclusion of the billions of Rupees taken by overseas casinos regulated under the Malta Gaming Authority (MGA), Curacao licensing, and casinos that operate on the black market with no licensing.
What makes the exact figure so hard to predict is players in India also gamble using crypt, which with the anonymity of virtual currencies, it’s hard to say how much online sports betting and casino turns over each year.
However, where India does have control over these figures is with gambling companies that pay taxes. Even then, I am sure a small minority of these companies swindle the books slightly, but probably not enough to have a drastic downside effect on tax revenues.
The problem with these figures is that they are mainly based on GGR (Gross Gambling Revenue). With a 30% tax rate on winnings, which is way too steep considering the risk, RTPs as high as 96% on video slots and the house edge as low as 0.5% on games like Blackjack, a ₹ 413 billion a year market is likely worth ₹ ₹ 300 billion in winnings and so 90 billion in taxes.
The have also been discussions on new taxes for online gambling companies operating in India. These would come into effect when the official online gambling licensing authority eventually comes into force.
Finance Bill 2023
The new Finance Bill 2023 outlines two tax implications. The main purpose of the new tax bill is to ensure winnings do not escape the tax laws applied in India.
- Section 194BA – tax deduction at source—from the operator
- Section 115BBJ – tax deductions for winnings from gambling
Under each of these, the limits before tax applies are as follows:
- The old rule that states any winnings over 10,000 Indian rupees in a financial year are subject to tax will now be abolished
- 30% online gambling tax applies to all winnings
- Casinos cannot split payouts to reduce the tax threshold
New online gambling tax clause – 30% online gambling tax
According to the news sources I am reading, one of the main reasons online operators are confused is because the Finance Bill mentions that it ‘plans’ to include a new section—194B, which will specifically apply to online gambling. This would suggest the current laws do not yet apply to online casinos or sports books.
The confusion: According to a news report on BloombergTax, the rules between online and land-based gambling are exactly the same. Hence, some are asking why to separate them into two. In my opinion, I feel it makes things clearer, but that’s just me.
Some clarification
- Section 194BA will come into action from 1 July 2023
- Tax on winnings on user accounts should be deducted by the operator
- The person releasing the winnings is responsible for the tax deductions i.e., the operator
- 30% online gambling tax from gambling per tax year (yes I said it again!)
Will the new tax rates laws create a black market?
Absolutely yes. A resounding yes. 30% tax on winnings playing online casino games to winning a sports. That’s an insane rate of tax. Even the UK only charged a 9% tax on horse racing before the government raised this to 10%, and then abolished the gambling tax altogether. With cryptos so readily available, and plenty of overseas online casinos not bound by the tax laws of India, I see a 30% tax levy harming the industry.
Many online casinos are quite willing to disguise gambling payments as payments for goods or services via an intermediary financial processing company. Hopefully, this is just an introductory rate and taxes will fall in the future.
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