How to Calculate Tax on Online Casino Winnings in India?

In our previous article, we explored The Rise of Online Casino in India, uncovering how digital platforms are redefining entertainment for millions of Indian players. As online gaming becomes more mainstream, it’s also important to address a topic that many overlook – taxation on winnings.

In this guide, we break down how to calculate tax on online casino winnings in India. From understanding the legal framework under the Income Tax Act to knowing when and how to report your earnings, this article provides clear and accurate information to help you stay compliant. Whether you’re an occasional player or a regular high roller, knowing your tax obligations is essential for responsible gaming.

Indian casino industry is seeing a rapid rise in the number of players due to greater accessibility and convenience. However, many new players have generally no idea about the tax implications of their winnings.

All the winnings are taxable under Indian law, whether the players are winning in roulette, slots, or poker. Players who have won big should know that there will be a tax imposed on those winnings. And, any non-compliance with paying taxes can lead to legal penalties.

Therefore, in this article, we will take a detailed look at the Tax Implications of casino winnings in India. And, how can players accurately calculate tax on online casino winnings in India?

Are Online Casino Winnings Taxable in India?

Yes, all the winnings generated on online casino platforms are taxable in India. The Indian Income Tax Act of 1961 clearly specifies that any income earned by wagering, betting, or playing, whether offline or digitally, is completely taxable under the section of ‘income from other sources’.

All casino games, whether it’s poker, slots, live dealer, or others, are completely taxable regardless of the platform being Indian or international.

The government has mandated a flat 30% tax and additional cess, and surcharges on online casino winnings. There are no deductions or exemptions on this amount.

If a play has earned ₹10,000, then the online platform has to deduct Tax Deducted at Source before approving it for withdrawal.

Moreover, legit organizations such as CBDT have clearly stated that all income from gambling and online casinos must be mentioned in the income tax returns.

Any non-disclosure or non-compliance can lead to legal issues. Players who are active on online casino platforms and win big need to be aware of these legalities.

Understanding Section 115BB of the Income Tax Act

Section 115BB of the Income Tax Act, 1961, is an important provision that is used to regulate and govern the taxes on income generated from casinos, betting, gambling, and lotteries.

In this provision, it’s clearly mentioned that any income generated from such sources will be taxed at 30% irrespective of the player’s total income or slab. 

It means that even if any players fall under lower tax brackets, they will still be charged at 30%. Moreover, no deductions or exemptions are permitted in this provision. The entire winning amount is taxed at the gross level.

This means the entire winning amount will be taxed and not just the profit generated. The regulatory bodies will also place additional cess and surcharges on top of the original taxation.

How to Calculate the Tax on Your Winnings Manually

It is very simple and straightforward to calculate the taxes on the winning amount. Just follow these steps:

1. Firstly, find out the total winning amount. Like, if any player wins ₹50,000 from a casino platform, then that entire amount is taxable.

2. Now, simply apply the tax rate on this amount, which is a 30% flat rate. For a winning amount of ₹50,000, the amount to be paid in taxes will be 30% of ₹50,000, which is ₹15,000.

3. Additional cess and surcharges should also be added to the tax amount. Normally, a 4% cess is charged on the tax amount. For ₹15,000, it will be 600. 

Please note that this cess is charged on the tax amount and not on the original winning amount.

4. Once the tax amount and the cess charges have been found, simply add them together to find out the entire tax liability. In this case, it will be ₹15,000 + ₹600 = ₹15,600. 

This is the total tax to be paid on the winnings of ₹50,000.

5. The next step is to verify if the platform has deducted TDS or not. If the platform has already deducted TDS, then minus that number from the total tax liability. The TDS certificates provided by the platform itself as Form 16A.

6. Now, all the steps are done. Report the full winning amount in the IT returns as Income from Other Sources and make sure to pay the taxes accordingly.

This is the entire step to calculate taxes on the winnings on income from any online casino platform. It doesn’t matter if the platform is situated in India or not; Indian players are obliged to pay taxes on their winnings. Please note, always check with the local authorities to ensure this information is still valid!

Foreign Casino Winnings and FEMA Compliance

As mentioned earlier, winnings from any foreign casino site that is not based in India are also completely taxable under Indian law. 

An Indian resident is required to pay taxes on the income earned from such sites, and the tax rate is 30% along with additional charges.

Moreover, transfer of winnings from foreign casino platforms to an Indian bank account falls under the regulation of the Foreign Exchange Management Act (FEMA).

This act mandates that all such foreign transactions into Indian casino platforms must comply with the latest RBI guidelines. If any anomaly or large inward fund transfers are detected, then it can be under suspicion, and not declaring them as personal income can trigger legal action.

Therefore, for players, it’s very important to be transparent about all the winnings from the online casino platform. 

They have to declare these winnings in the Income Tax Report as ‘Income from Other Sources’ and have to maintain the right documentation and transaction records.

It is recommended that players hire reliable tax professionals who can ensure complete compliance with both income tax regulations and FEMA guidelines, especially when dealing with foreign gambling winnings.

Penalties for Not Declaring Casino Winnings

Any failure to declare online casino winnings in the annual income tax report can trigger legal actions and consequences under the Indian tax regulations.

The Income Tax authority considers any nondisclosure of gambling winnings as a tax offense, and this is a severe crime and punishable.

Legal penalties can be levied on such acts, such as fines up to 100% or even 30% of the unpaid tax. In other cases, there can also be imprisonment for up to seven years.

Final Words

It is crucial for online casino players to have clarity about the taxation regarding Online casino winnings. The government has levied a 30% flat rate on all winnings plus additional charges without any scope for deductions or exemptions.

Players are advised to strictly follow these guidelines and be transparent about their winnings to avoid any legal action.