Taxation and Casino Gaming in India: Legal and Financial Implications

The casino industry in India, although limited in physical presence, has seen rapid growth—particularly in the online segment. This expansion has sparked considerable interest from regulatory and taxation authorities, especially regarding the revenue generated from online casino activities. As such, understanding the tax effect in online casino games in India is crucial for players, operators, and policymakers alike.

1. Legal Status of Casino Gambling in India

Gambling laws in India are governed by both central and state legislation. The Public Gambling Act of 1867 prohibits operating or visiting gambling houses in most parts of the country. However, states like Goa, Sikkim, and Daman have legalized and regulate Online casinos under their own laws.

Online gambling Platform like  www.indiacasino.io, including casino games like Teen Patti, Andar bahar, poker, rummy, roulette, and slots, operates in a grey area—though recent legal and tax reforms aim to bring more clarity and control over this sector.

2. Taxation on Casino Winnings

Under the Indian Income Tax Act, all winnings from gambling, lotteries, card games, and betting are subject to taxation:

• Flat Tax Rate: Winnings from online casino games in India are taxed at a flat rate of 30% (plus applicable surcharge and cess) under Section 115BB.
• No Exemptions: There are no deductions or exemptions allowed against such income, not even under Section 80C.
• TDS Deduction: If the winning amount exceeds ₹10,000 in a single transaction, the casino operator is required to deduct Tax Deducted at Source (TDS) at 30% before payout, under Section 194B of the Income Tax Act.

3. GST (Goods and Services Tax) Impact

The Goods and Services Tax (GST) also plays a significant role in shaping the casino landscape in India:

• Pre-July 2023 Regime: Online gaming platforms were charged 18% GST on platform fees (commission or rake).
• Post-July 2023 Amendment: As per the 50th GST Council Meeting decision, all online gaming, casinos, and horse racing are now taxed at 28% GST on full face value (not just platform fees), effective October 1, 2023.
• This move was aimed at curbing illegal gambling and increasing tax revenue, but it also significantly raised the cost for both players and operators.

4. Impact on Casino Operators

Taxation, particularly post-GST reforms, has heavily impacted operators:

• Compliance Burden: Strict compliance requirements, record-keeping, and monthly tax filing have increased operational complexity.
• Profit Margins: Higher GST on total bets rather than commissions can erode operator profit margins, especially in games with small rake percentages.
• Deterrent to Investment: High taxation and regulatory uncertainty discourage foreign and domestic investment in the gaming sector.

5. Impact on Players

• Reduced Winnings: With TDS deducted at source and flat taxation on all winnings, players receive significantly less than their gross prize.
• Legal Liability: Even if TDS is not deducted, players are liable to report such income and pay taxes while filing income tax returns.
• Record Maintenance: It is the responsibility of the player to maintain records of winnings, losses, and taxes paid—especially in the online space.

6. Way Forward and Recommendations

• Clarity in Legislation: There is a need for unified and clear laws across states to eliminate ambiguity in taxation and legality.
• Rationalized Tax Regime: Industry bodies are advocating for a rational tax structure that differentiates between games of skill and games of chance.
• Public Awareness: Players should be made aware of their tax obligations to avoid legal penalties.

Conclusion

The tax regime surrounding casino games in India is stringent, aiming to regulate the industry and generate public revenue. While this promotes accountability and discourages unregulated gambling, it also poses challenges to the sector's growth. A balanced approach—combining responsible regulation with supportive taxation—can ensure sustainable development of the gaming ecosystem in India