The current taxes on Indian lottery wins are often felt to be excessive. With certain mandatory income tax rates already applied, the additional tax on lottery wins can cause certain levels of hardship to some people. The current tax rate is set at 30%, with additional charges making it up to around 31% in total, which is seen as a large amount. What many players are most annoyed about with the tax rates is that they are applied before the winnings have even been paid out, so most players are unable to get access to the full amount they have been paid.
There are currently no talks about changing the way the tax works, but let’s take a closer look at what it currently does and how it could potentially change in the future.
Current tax laws
The current tax laws, as we have already mentioned, take 30% of winnings from players before they even see the prize. This isn’t just on lottery winnings, it’s from prizes of any kind from any contest. So this could be a TV game show or even a crossword competition in a magazine. The only time this doesn’t happen is if the prize is below R10,000.
It’s not just cash prizes that are taxed either. If you win something that has a high monetary value, for example a car, then you will have to pay the 30% tax on that too. This means that some people might have to sell the prize in order to pay the tax on it. This means that they would never receive the prize and would just get whatever was left after the sale of the prize. There are some situations where the prize givers will carry the burden of the tax on the prize, but this isn’t always the case. It does mean that a lot of players feel restricted by these tax laws.
At this moment in time changes look very unlikely, however there could be some changes in the future which will benefit both Indian players and the country as a whole. The first big change would be to make online casinos legal. With this change it would open up the country to a huge amount of revenue. The tax revenue on the profits that online casinos make would dwarf any revenue on prizes awarded to players. It could allow the country to reduce, or even remove, the tax on prizes and therefore give players a welcome tax break.
The increased tax revenue on gambling company profits would work twofold. Firstly, it would give more players access to online gambling. This would increase revenues for both the gambling companies and through tax. Secondly, it would allow players to get the full amount of their winnings. This in turn would encourage more players to take part in online gambling. This again would increase the revenue that was created. It would be a change that would benefit everyone, so could only be seen as a positive.
Another change could be the introduction of deductions on taxes that people have to pay. So, if someone wins a big prize in a lottery, they could receive a reduction on the tax that they have to pay on their income. This would give players an extra incentive to play the lotteries as they would receive both a prize, but also a reduction on the potential tax that they will have to pay out.
These changes would be progressive changes that would give citizens in India a huge range of benefits. The increased tax revenue would also allow the government to invest more into infrastructure. This would be a huge benefit to everyone in the country and as such would only be a positive to the country of India.
There are currently a large number of different lotteries that are carried out within India. With a removal of taxes on any winnings it would increase the number of players. This could lead to an increase in the number of lotteries that are run. Even just tax deductions would increase the number of players who took part in lotteries, which in turn would increase the level of tax revenue.
Currently there are a large number of different lotteries that are running. It could lead to even more lotteries being run or just larger prizes offered through the lotteries that are already running.
Future changes to be made?
At this moment in time, it doesn’t look likely that any changes will take place. However, as uncertainty recedes it will give world governments that chance to make more progressive changes to their legislation. The way that tax is applied could be something that the Indian government looks into in the future, especially when the country is more stable.
It’s still best to not expect the positive changes, because they haven’t been spoken about yet. It also means that if the changes do come into play, then it will be a pleasant surprise to Indian players everywhere.