Direct Tax
Consulting
ESG Advisory
Indirect Tax
Growth Advisory
Internal Audit
BFSI Audit
Industry Audit
Valuation
RBI Services
SEBI Services
IRDA Registration
AML Advisory
IBC Services
NBFC Compliance
IRDA Compliance
Finance & Accounts
Payroll Compliance Services
HR Outsourcing
LPO
Fractional CFO
General Legal
Corporate Law
Debt Recovery
Select Your Location
The term Betting and gambling often used interchangeably, putting your bet on something of value, mostly money with the realization of risk in the hope of gaining a much larger amount from the outcome of any contestant or a game. The outcome will solely depend on luck or a chance. Similar to this there is a practice of lottery, it is a game of chance which also includes online games some examples of the lottery are bingo, lotto, lottery etc.
All the income earned from betting and gambling which also includes lotteries will come under the ambit of GST as per the applicable rates.
Let’s understand the laws and tax rates of each of the following:
Table of Contents
Betting is also known as a form of a wagering contract in which monetary benefits is payable by either of the party as a consequence of an unsure event. According to the Oxford industry, Gambling means playing games of probability for monetary benefit, or any risk is taken in the hope of victory. On the other hand, betting means the action of gambling on the result of any game, race, or any other predictable event. Hence the terms Betting and Gambling can be used interchangeably.
In India, gambling is illegal; the Public Gambling act 1867 prohibits all the gambling related activities in India. According to this legislation all the gaming houses or any place where gambling business is conducted for earning profit is banned from carried out.
Section 3 of the public gambling act defines gaming houses and casinos as under:-
Any room, enclosure of wall, any house or any place where games are played including tables, dices, cards or any other instruments used or kept by the person owing that enclosed room for his own profit or gain.
In the landmark judgement of Future Gaming Solution Ltd v. Union of India by Sikkim High Court, it was concluded that the lottery is covered under ‘Betting and Gambling. The lottery is just an act of betting and gambling and the powers to impose law and taxes on the on lotteries have to be inherently under an expression of betting and gambling.
The word lottery is having its roots attached from the Dutch word Loterij, which means destiny or fate. Lottery is often termed as a game of chance for example lotto, bingo, lottery etc and it also includes online gaming. The Lottery is a type of gambling which often involves the drawing of lots for own benefit. It is also known as an actionable claim and it does get covered under the classification of goods and services.
The Lottery consists of 3 essential characteristics:
These three activities including lottery, betting and gambling are covered under the negative list for taxation. The uniform tax rate of 30% is levied in the respective price money won from these activities. The incomes from all these sources are covered under the category of “Income from Other Sources” as per the decision made by the Goods and Service council. This tax act is an additional tax on cess, which brings it a total of 31.2%.
All the supporting services including promoting and organising the events related to betting and gambling including any form of lotteries will not be covered under the negative list. In the case of Union of India v. Martin lottery Agencies, the Supreme Court held that ‘charging service tax on the sale of lotteries is not allowed but the service tax will be applicable on the marketing and promotion for the sale of tickets.
Income tax implication
According to section 115BB, states that where the income of an individual assessed and include the income by way of winning from lotteries, betting, and gambling whatsoever, the income tax will be payable at the rate of 40%. This will also include any other allied activities which relate to betting and gambling.
Gifts received in kind
There are many cases where instead of providing cash on the winning, a person would receive services or products for free. Generally, the casinos treat their valuable and loyal customers with luxury trips, providing them exclusive seating or expensive iPhones. When this situation arises where the benefits are received in kind, the tax should be paid either by the casino owner or the winner of the prize. The tax will be applicable on the market value of that particular good or service and is taxable at a rate of 31.2%.
No Deduction allowed
Loss from the activities of betting and gambling are not allowed to be deducted as expenditure from the computation of the Income tax. In other words, the entire income generates through these sources will be taxable in respect to section 58(4) of Income Tax Act, 1961[1].
Read our article:The Amazing History of Income Tax in India- Read Now
A joint venture is a strategic business arrangement in which two or more companies collaborate...
With the rising inflation rates and various other economic factors, wealthy Americans are incre...
Before approaching the new suppliers or any other third parties, you should always go for the v...
With the increasing landscape of Fintech Companies, it is increasingly vital that fintech compl...
This blog gives a detailed description through an audit report for industrial waste by examinin...
Are you human?: 2 + 3 =
Easy Payment Options Available No Spam. No Sharing. 100% Confidentiality
Under section 285BA of the Income Tax Act, 1961, an SFT (Statement of Financial Transaction) or (Specified Financia...
31 Mar, 2022
Tax is the primary source of revenue for Government in India, and thus, various forms of income are taxable under t...
23 Oct, 2019
Chat on Whatsapp
Hey I'm Suman. Let's Talk!