The poker industry in India has witnessed a massive rise in popularity over the last five years with more and more players joining the game. There are several factors that have contributed to this growth such as smart phone proliferation, affordable mobile phone data and increasing awareness around the game. Besides, major live series in India and other Asian regions, marquee online events with massive prize pools, and poker coaching can be credited to the fast-growing landscape of poker.
While we can see growth in both the live and online poker arena, one thing that pinches both poker platforms and players is the complex landscape of taxation. A massive 28% GST and taxes on poker winnings are affecting both platforms and players in the industry. Let us quickly dive into various taxes applicable, including Income Tax, TDS, GST, rake implications and some promotional structures such as “Splash the Pot”.
Goods and Services Tax (GST)
In the early days (2000s), online gamers and operators had a lot of freedom due to no specific or strict tax policies governing online games. As online gaming (poker, rummy and other games) exploded in popularity after 2010, the industry came under the government’s radar. However, the government started targeting online gaming and the game changed when the Goods and Services Tax (GST) was introduced in 2017. Initially, an 18% GST rate was levied on the platform’s gross gaming revenue (GGR).
However, things became tough from October 1, 2023 when GST was increased to 28% on the full face value of bets. The government started charging 28% GST on every add cash (deposit). This affected players’ costs and platform profitability and received intense criticism from both players and platforms, thus hampering the growth of the industry. That is why several bodies including AIGF started opposing and asking for GST relief. They are still fighting for GST relaxation and things can be better if the government considers their concerns and changes its stance on GST.
While the government’s objective behind this increase in GST is to bring in more transparency, curb tax evasion and generate more revenue for the government, it affects both players and platforms. After this new GST regime, if a player invests ₹1,000 in an online poker game, he/ she has to prepay as GST (28%) to the government, meaning the player has to pay ₹1,280 with 28% GST, irrespective of the outcome of the game.
Tax On Poker Winnings
Under the Income Tax Act of 1961 under Section 115BB, winnings from online games such as poker are classified under “Income from Other Sources”. This means that your poker winnings are taxed at a flat rate of 30%, irrespective of how much you win, no matter whether you score a small win or secure a huge prize, a flat 30% will be applicable to both online and offline games. For example, if a player wins ₹100,000, he or she will have to pay ₹30,000 as income tax to the government.
However, this applies on the net winnings of a player after deducting the losses from the same or any other game in the same financial year. For instance, if a player wins ₹100,000 but loses ₹50,000, he or she needs to pay tax only on ₹50,000 (100,000 – 50,000), which amounts to ₹15,000.
Tax Deducted at Source (TDS)
If your winnings exceed ₹10,000, the online poker platform is required to deduct Tax Deducted at Source (TDS) at the rate of 30% under Section 194B. This is applicable at the time of withdrawal or at the end of the financial year. This means if your winnings are below ₹10,000, you do not have to pay any tax on it. However, this TDS policy was applicable before a change in TDS in 2023. The Finance Act of 2023 removed the minimum threshold of ₹10,000 on TDS from online winnings. Following this change, even minimal winnings became subject to deduction. This required players to pay 30% TDS on their net winnings even if they are below ₹10,000. So, even if your winnings are minimal, you have to pay TDS.
Pro tip: Even if your TDS is deducted, you must report it in your income tax return (ITR), especially if you have any extra income or want to claim refunds.
GST Leading To High Rakes in Poker
Ever since its implementation in October 2023, GST has been a topic of debate. While the government claims that it is to bring uniformity, clarity, transparency and more revenue for the government, it has faced intense criticism from both players and operators. Prior to GST, the rake charged by the online poker rooms used to range from 2.5% to 5%, which changed after the implementation of GST. In response to the increased GST burden, several major poker platforms raised their rake. As per sources, some leading poker sites are now charging as high as 15% – a substantial increase, which is impacting players’ net profits and game.
Among other concerns for poker players in India is an increase in pre-flop rake in cash games and the “Splash the Pot” strategy. Pre-flop rake charges combined with “Splash the Pot” reportedly amount to over 8% rake in total, which is also eating into players’ profits from the game. Moreover, online poker platforms are also charging for instant withdrawals, which is also a concern for poker players as it also affecting their profitability.
Although “Splash the Pot” is meant to incentivize players for more active play and can boost potential winnings, it has been observed that the full amount of the rake taken as part of “Splash the Pot” strategy is not returned to the players, which can still hurt the overall profitability.
In order to navigate the complex taxation landscape of poker winnings in India, you need to understand various tax laws and platform-specific policies. Players should account for income tax, TDS and GST when calculating their net winnings. Additionally, increasing rake percentages and promotions like “Splash the Pot” require you to change your approach to playing, as these factors can also affect overall profitability.
Keep following PokerProNews for more such updates on taxes on poker winnings.
