Do You Have to Pay Income Tax on Earnings Through Online Betting?

Online gaming, whether on mobiles or on other digital devices has become immensely popular in the country. A smaller niche of online gaming is the online betting industry in India, which has flourished due to several contributing factors in the last couple of years.

Due to a rising passion for sports such as cricket or football, as well as a growing dependence on digital payment methods, users are now more open to placing wagers or betting on their favorite sports in order to win money online. Another huge factor that contributed to the growth of the ethical betting industry in India was the pandemic and its resulting lockdowns. Many people sought newer forms of entertainment, and online gaming came up as a great option, one which also allowed users to make real money while sitting at home.

Is it legal to bet online?

According to the Public Gambling Act of 1867, which is followed in most Indian states, only physical gambling houses are prohibited. This essentially means that people cannot gather in a public house and bet on various outcomes of a cricket match or anything else.

However, most Indian states have not prohibited the use of online betting apps or websites, which are based offshore, that allow players to place bets on sports by depositing money online. While this online type of betting is not really regulated, it is also not illegal for players to indulge in it. This is why finding offshore betting sites or apps is the safest way to bet in India.

However, in order to also respect the laws of FEMA or the Foreign Exchange Management Act as well, players must be wary of international betting brands that do not accept Indian rupees. While you may be able to deposit in any other currency, FEMA makes it very difficult to withdraw money from such companies. That’s why players prefer to stick to more reputable brands that allow them to play in Indian rupees.

Do you have to pay tax on any earnings from betting online?

Even if you have found the best brand to help you with your online escapades, there are still more things to consider when you’re betting online. There is the question of income tax that players must also keep in mind when they use online betting apps in India. 

First of all, any money you withdraw from any app or website is considered taxable income for you. This income or earnings from apps must be declared under Section 115BB of the Income Tax Act of 1961. According to this section, “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” will be levied an income tax of 30%.

Moreover, players who win any income in such a category cannot claim any exemptions or allowances on it. Any and all income earned from online gaming must be taxed at 30%, without any exemptions or allowances.

The company or betting brand could also choose to deduct tax at the source or TDS before crediting the amount to the player. However, this is done only on very rare occasions, and more often than not, the best course of action for the player is to declare their income from other sources and pay the 30% tax on it.