Betting Laws In India
India, on the other hand, is still playing with their laws. According to the Public Gambling Act, 1867, a law even older than Mahatma Gandhi still rules, owning the operations of any gambling house, entering a gambling place, or having a gambling device is prohibited. It does have an exception, though. To be more specific, there are two games in sports betting. India does not have any modernized laws for online gambling. The rules still in place are particularly for brick and mortar casinos imposed by the British in 1867. However, according to the Income Tax Department of India, online gambling has specific laws when it comes to taxation. Most of the India is subject to the Public Gambling Act of 1867 and the Technology Act of 2000. Under those laws, sports betting is not permitted but individual states have right to make their own laws. According to Public Gambling Act (1867),all kinds of gambling in India are illegal. 432 Likes, 4 Comments - George Mason University GMU (@georgemasonu) on Instagram: “'As a freshman at Mason, I had difficulties being on my own for the first time.
Overview
The Public Gambling Act, 1867 ('Gambling Act') is the general law governing gambling in India. However, the state legislatures, under the Constitution of India, have been entrusted with significant regulatory leeway to form state specific gambling laws. The Gambling Act is the central enactment which has been adopted by certain states in India and other states have enacted their own legislation to regulate and govern gaming/gambling activities within their territory ('Gambling Legislations'). Most of the Gambling Legislations have been enacted prior to the advent of virtual or online gambling and hence these Gambling Legislations primarily refer to gaming/gambling activities at the physical premises.
Regardless of the mounting popularity and the revenue generated by gambling and betting in India, the Indian laws and the Courts in India have been averse to any game of chance and probability, except in States of Goa and Sikkim. Since the advent of British rule, many Indian states have enforced the Gambling Act prohibiting all forms of gambling and betting in their respective states. Goa and Sikkim are the only exceptions which have allowed gambling and betting in their state, subject to regulation of their respective state Governments. List II of Seventh Schedule of the Indian Constitution, endows the state Governments with the power to legislate on matters concerning gambling and betting. India continues to enforce the pre-independent gambling legislations enacted by the British rulers, but it is interesting to note that UK has changed its gambling laws by allowing almost all forms of gambling in UK in light of the changing societal norms of their country.
The state of Goa has allowed gambling by enacting the Goa, Daman and Diu Public Gambling Act, 1976. The Goa, Daman and Diu Public Gambling Act, 1976 was amended to allow card-rooms in offshore vessels and slot machines in five star hotels subject to prior approval and authorisation of the State Government on payment of a specified recurring fee. The state of Sikkim has also legalised gambling by enacting Sikkim Regulation of Gambling (Amendment) 2005. The Sikkim Regulation of Gambling (Amendment) 2005 authorises the State government to notify the specified areas where permission can be granted for running of casinos on payment of a specified fee.
This gives us an overview of the gambling laws in India and it is clear from the same that there are extensive restrictions on any kind of gambling or wagering activities in India. However, all the Gambling Legislations in India have excluded 'games of skill' from the purview of gaming activities in India. There have been numerous debates all over the world as to which games or activities can be considered as 'games of skill' and which games or activities are based predominantly on luck in which a person's intellect has been very little roles to play.
'Gambling' is not defined under the Gambling Legislations. The dictionary meaning of gambling is 'to stake something on a contingency; take a chance'. The gambling under the Gambling Legislations does not include (i) betting on a horse race (subject to the legal regulations); (ii) games of skill (excluded under the Gambling Act and by the court's judgments); and (iii) lotteries (regulated by lottery laws of India).
Game Of Chance And Game Of Skill
Gambling is understood both under its traditional form as well as modern avatar. The traditional gambling is understood in the context of physical space, brick and motor format, whereas modern gambling consists of computers connected offline or online, mobile phones, internet, etc. The Gambling Legislations exclude 'games of skill' from the purview of gambling and hence doesn't attract the penal provisions.
In State of Andhra Pradesh v K. Satyanarayana and Ors [AIR 1968 SC 825], the Court held that:
'The game of Rummy is not a game entirely of chance like the 'three-card' game mentioned in the Madras case to which we were referred. The 'three card' game which goes under different names such a 'flush', 'brag' etc. is a game of pure chance. Rummy, on the other hand, requires certain amount of skill because the fall of the cards has to be memorised and the building up of Rummy requires considerable skill in holding and discarding cards. We cannot, therefore, say that the game of Rummy is a game of entire chance. It is mainly and preponderantly a game of skill. The chance in Rummy is of the same character as the chance in a deal at a game of bridge.'
In Manoranjitham Manamyil Mandram v State of Tamil Nadu [AIR 2005 MAD 261], the Court held that:
'Therefore, while it is the right of the appellant to have recreational activities which are not prohibited, the respondent's right to take appropriate proceedings against illegal games of betting, wagering, etc. is also provided for under the Act. Therefore, there cannot be a blanket direction as prayed for by the appellant. The question whether a particular game is a game of skill or chance is to be decided on the facts and circumstances of each case. As and when proceedings are; initiated against the appellant in accordance with law, the appellant shall always have the right to question the same or challenge the action of the respondents if it is not in accordance with law.'
The Gambling Act, by virtue of Section 12, excludes 'game of skill' from the purview of law. Supreme Court in the case of Dr. R. K. Lakshmanan v. State of Tamil Nadu [AIR 1996 SC 1153] defined 'game of skill' as 'one in which success depends principally upon the superior knowledge, training, attention, experience and adroitness of the player'. The Court pointed out that a game of chance is one in which the element of chance predominates over the element of skill and similarly a game of skill is one in which the element of skill predominates over the element of chance. It is the dominant element – 'skill' or 'chance' that determines the true character of the game.
The Supreme Court in Dr. R. K. Lakshmanan (supra) held that horse racing is a game of mere skill within the meaning envisaged under the Madras City Police Act, 1888 and Tamil Nadu Gaming Act, 1930. The Court explained through various instances how horse racing can be considered a game of skill as the betting in horse races are based on evaluative skills and various other factors like skill and management of the jockey.
Online Gambling
The State of Sikkim enacted the Sikkim Online Gaming (Regulation) Act, 2008, which was passed on 28th June 2008 by the Sikkim Legislative Assembly with dual object of controlling and regulating online gaming through electronic and non-electronic formats and to impose tax on the same within its territory. The Sikkim Online Gaming (Regulation) Rules, 2009 has been subsequently enacted and the same has been amended from time to time.
The Sikkim Online Gaming (Regulation) Act, 2008 was amended on August 19, 2015 restricting the offering of 'online games and sports games' under the licenses issued under the said Act to the physical premises of the game parlours within the geographical boundaries of the State of Sikkim through intranet gaming terminals. Initially, the wording of the Sikkim Online Gaming (Regulation) Act, 2008 envisaged that the license shall allow the licensee to offer its games across India without restricting it to the territory of Sikkim.
The Government of Nagaland has enacted the Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Act, 2016. The said Act provides for regulation and promotion of 'games of skill' through the issuance of licenses. This Act provides that the license holders under the same can operate from any State in India where gambling is allowed.
Sikkim has framed legislation regulating the virtual or online gaming activities within its territory. Except for the Sikkim Online Gaming (Regulation) Act, 2008 and Nagaland Prohibition of Gaming and Promotion and Regulation of Online Games of Skill Act, 2016, none of the other Central or State gambling legislation specifically mentions online gambling which puts online gambling involving 'game of skill' in a grey area.
In the present world where everyone is connected through internet, a person sitting in India can bet through a foreign owned website. There is no law which directly regulates/prohibits such activities in India. In the absence of any specific law directly regulating the online gaming/gambling through a server located outside India, these can be regulated through the internet intermediary compliances, cyber law due diligence requirements prescribed under the Information Technology Act, 2000, restrictions on foreign exchange earnings and outgoes and strict enforcement of anti-money laundering laws.
Conclusion
The gambling laws in India continue to be confusing and unclear. The judiciary time again through various decided case laws have tried to clear the air and provide clarity on the subject. However, the recent technological changes have thrown open the sector and have allowed the masses to participate in activities which lie in the border line of gambling laws in India. These activities are yet to be scrutinized and tested through the courts in India. It is advisable that before someone ventures into any gambling activity in India, he/she may take a sound legal advice in respect of the same so as to avoid any unnecessary legal implications.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Betting And Gambling Laws In India
All winnings from online gambling are fully taxable by a mounted rate of 31.2% of the net earnings.
In the past decade, the popularity of online gambling has increased multifold in India. As the access to the internet grew and new casinos launched in the country, people have been going gaga over the enthralling gaming experience these websites offer. Although gambling laws are pretty vague in the country, there are certain aspects of such virtual gambling platforms are regulated strictly. One of such elements is Tax laws associated with the winnings through online gambling.
India does not have any modernized laws for online gambling. The rules still in place are particularly for brick and mortar casinos imposed by the British in 1867. However, according to the Income Tax Department of India, online gambling has specific laws when it comes to taxation.
Let’s delve into the details regarding Tax Laws for Online Gambling in India.
History of Gambling Laws in India
Back in the days, Indians had complete freedom of gambling. So much so that gambling is mentioned in Indian mythology. There used to be no rules to regulate or prohibit gambling in India. However, like most aspects of life changed amid the British rule, gambling too was impacted. In the year 1867, the British government enacted ‘The Public Gambling Act of 1867’. This came to be the first and only gambling law prohibiting the practice in the entire subcontinent.
In the present day, almost 200 years later, there have only been a few amendments in the colonial law. The old rule is still in practice across the country except for a few states that have enacted their own gambling regulations.
Online gambling undoubtedly requires well-defined protocols to ensure the safety of the players from fraudulence and addiction, but no decision has been made in this regard. This primarily leaves the legalities of online gambling on the fence, and the decision lies in the hands of each state to clearly state its position in legal matters.
Most states have no rules in place to regulate gambling. Yet states like Maharashtra have an explicit ban on both online as well as offline gambling throughout the state. Similarly, Goa, Sikkim, and Daman have legalized all forms of gambling. You can easily find brick and mortar casinos in these states as well as online casino sites.
Taxation on Gambling Winnings in India
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In India, the winnings from gambling platforms are fully taxable and mandatory for every player to pay. This law comes under Section 115BB of the Income Tax Act under the head ‘Income From Other Sources’. This law brings any income from online or offline gambling, lottery and card games under the purview of this Act.
Based on this law, the player needs to pay a mounted rate of 31.2% of the net earnings. The division of this amount is a flat 30% tax rate plus cess. There are zero exemptions of the basic limit for the profits based on the amount won or the games. Regardless of which game you play on a gambling website, or how much you win, the tax needs to be paid.
The other provision related to this realm of online gaming falls under Section 194B of the Income Tax Act. According to this, tax Deducted at Source or TDS is applicable for all winnings through online gambling exceeding the amount of Rs. 10,000. This means that the source company (gambling website) must deduct tax before the final remittance to the player.
The income through online gambling platforms has no availability of returns to be claimed in the tax returns.
Reporting TDS Deducted Earnings
As aforementioned, any income above Rs. 10,000 through online gambling is subject to TDS. As the player, it is your responsibility to disclose the details of TDS deductions in the amount received while filing your income tax returns. This is mandatory even after you provide all the necessary information and documents such as PAN, bank account details, and address to the online casino.
Apart from real cash prizes, online casinos sometimes provide other rewards. This is usually the case with VIP or loyal players. Such rewards are mostly extra benefits or promotional to keep players engaged and devoted to the casino. These benefits are taxable as well. Standard rewards or benefits include gift hampers, flight tickets, sponsored vacations, birthday gifts and similar.
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If you receive the reward in kind (any non-cash exchange), the market value of the reward should be disclosed. In such cases, the casino company is responsible for deducting the TDS from the premium based on its value.
Real money rewards, as well as added benefits in kind, have been one of the main factors attracting players to online gambling. It is always the best practice to be mindful while gambling and being a responsible taxpayer. Do not forget to include each of your gambling rewards while filing your tax returns and disclose all the necessary details as required to avoid any legal repercussions in the future.