1. I wouldn't be surprised that they will try to tax poker winnings in the UK at some point. Online wallets such as netller or from gambling site then you have to pay 30% tax + 30% panelty in India.
2. 'For a professional poker player there will be surtax plus the self-employed person's social security contribution, in addition to the 27%. His income will be taxed at 50.4%. Like all self-employed people, he will get deductions for expenses related to poker playing.”.
3. Winnings outside of India When a player wins more than INR 10,000 at an offshore casino, the casino operator should withhold 30% of the winnings for taxation purposes. However, this does not mean that the individual will not still have to pay local taxes as well. This applies if a person is considered to be a resident of India.

Despite the earlier post giving various provisions on taxes on gambling winnings, we have been receiving hundreds of queries seeking clarifications on the amount of tax to be paid on gambling winnings and different circumstances under which an exception can be sought from paying tax at source on gambling winnings. We have thus collated a few practical scenarios in a FAQ format clarifying different tax related aspects concerning gambling, lottery and betting winnings. The position of law has been clarified by Hersh Sayta of Ernst & Young and other eminent Chartered Accountants, lawyers and poker players having practical experience in the subject.

For many of us, gambling means buying the occasional lottery ticket on the way home from work, but the Internal Revenue Service says that casual gambling also includes raffles, casino games, poker, sports betting—and, yes, even fantasy football. When you win, your winnings are taxable income, subject to its own tax rules.

1. What is the rate of Income Tax payable on winnings from any card games, lotteries or other gaming activities?

As per Section 115BB of the Income Tax Act the current rate of Income Tax (as on financial year 2013-14) on poker winnings or winnings from any such card games etc. is 30%. However there is education and higher education cess payable on the taxable amount and hence the total effective amount of tax payable is 30.90%.

Section 2(24)(ix) of the IT Act defines card games and lotteries as follows:

Any winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or from gambling or betting of any form or nature whatsoever.

[Explanation.For the purposes of this sub-clause,

(i) “lottery” includes winnings from prizes awarded to any person by draw of lots or by chance or in any other manner whatsoever, under any scheme or arrangement by whatever name called;

(ii) “card game and other game of any sort” includes any game show, an entertainment programme on television or electronic mode, in which people compete to win prizes or any other similar game.

Section 115BB reads as follows:

Tax on winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort or gambling or betting of any form or nature whatsoever.

Where the total income of an assessee includes any income by way of winnings from any lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, the income-tax payable shall be the aggregate of

(i) the amount of income-tax calculated on income by way of winnings from such lottery or crossword puzzle or race including horse race or card game and other game of any sort or from gambling or betting of any form or nature whatsoever, at the rate of ²¹[thirty] per cent; and

(ii) the amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the amount of income referred to in clause (i).

2. Are organisers compelled to deduct Tax at Source (TDS) on poker winnings?

As per Section 194B of the Income Tax Act, on any winnings above Rs. 10,000/- (as per laws prevailing in financial year 2012-13) it is the responsibility of persons organising or managing the event to deduct 30.90% tax before releasing the winnings.

Section 194B reads as follows:

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Winnings from lottery or crossword puzzle.

The person responsible for paying to any person any income by way of winnings from any lottery or crossword puzzle or card game and other game of any sort in an amount exceeding ten thousand rupees shall, at the time of payment thereof, deduct income-tax thereon at the rates in force :

Provided that in a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings.

3. Are organisers required to give a TDS certificate when tax is deducted on winnings?

Yes, as per Section 203 of the IT Act and Rules framed thereunder TDS certificate has to be supplied by the deductor to the deductee within one month from the end of the month during which the credit has been given or the sums have been paid. [See this link for more information].

4. If prizes are awarded instead of cash, does TDS still have to be deducted?

Yes, TDS has to be deducted to the extent of 30.90% of the value of the gift/prize or the organiser has to ensure that the winner pays the tax amount upfront.

5. What is the liability for not deducting TDS?

Organisers or those responsible for the event can potentially face various liabilities for not deducting TDS and they would have to pay the amount payable, interest and other penalties from their own pockets if the amount is not deducted. Further, prosecution can be initiated for non-deduction of TDS and there is a maximum punishment of seven years imprisonment and fine. [See: Sections 201(1A), 221, 276B of the Income Tax Act].

6. Are set-offs permitted before deducting of TDS?

No, set-offs or any deduction/adjustment of costs etc. would not be permitted before deduction of TDS.

7. Is there any liability to deduct additional surcharge over and above the 30.90% TDS in case of gambling winnings?

As per the Finance Bill 2013, an additional surcharge is proposed to be levied on income from gambling under Section 115BB as TDS deductions under Section 194B on amounts exceeding specified limits. The manner and rates at which this surcharge is to be levied has not yet been notified.

Update: As per the Finance Bill, 2013 the following surcharge will be levied on the TDS deducted as per Section 194B:

The amount of tax so deducted shall be increased by a surcharge in the case of

(i) every non-resident (other than a company) at the rate of ten per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees ;

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(ii) every company other than a domestic company at the rate of two per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds one crore rupees but does not exceed ten crore rupees ;

(iii) every company other than a domestic company at the rate of five per cent. where the income or the aggregate of income paid or likely to be paid and subject to deduction exceeds ten crore rupees.

For Income Tax on gambling winnings in terms of Section 115BB the following surcharge shall be levied:

The provisions relating to surcharge shall be applicable w.e.f. 1st April 2013.

A file photo of a dealer handling chips at a casino.

SHELTON — A local professional poker player faces federal prison time after he failed to pay income tax on more than $1 million in gambling winnings to the Internal Revenue Service, according to federal prosecutors.

Guy Smith, 62, waived his right to be indicted Thursday and pleaded guilty to tax evasion during a video conference court appearance.

Court documents showed that Smith owns and operates Centerline Interiors, a business that specializes in commercial interior construction.

Authorities said Smith is also a “professional poker player and has participated in poker tournaments in casinos in Connecticut and other locations around the U.S. and the Bahamas.”

Smith withdrew funds from his business and personal bank accounts to fund his gambling business, authorities said.

For the 2012 to 2016 tax years, Smith did not provide his tax preparer with any bank statements, authorities said. During that time, authorities said, Smith received about $482,000 in income from Centerline Interiors that he failed to report.

Authorities said Smith also concealed his gambling income from his tax preparer, paying no income taxes on more than $1 million in gambling winnings, despite being notified by the IRS that he had to report all his winnings.

During the 2012 to 2016 tax years, authorities said Smith failed to pay a combined total of $821,415 in federal income taxes.

Smith, who was released on a $50,000 bond, is scheduled to be sentenced on March 4, 2021. He faces up to five years in prison.

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Authorities said Smith agreed to cooperate with the IRS and pay all outstanding taxes, penalties and interest.