Whenever you play in an online or offline casino, there are lots of misconceptions about taxes. At your first withdrawal, you’ll see that some funds are withheld, and the rest of them enter your bank account. Why is this happening, and what else you should know about taxes? Let’s find out in the following article about the common tax problems that online casino players have.
Reporting the winnings from Guts casino or other operators it’s an easy process, and it’s usually done by the gambling sites you are playing at. According to the law, all casino winnings are taxable. That includes horse racing games, slot games, bingo, and poker games.
In India, your winnings are taxed at 30%. If you win 30.000 INR, 30% of them are withheld and reported. From the 30.000 INR, you’ll remain with 21.000 INR. In other states, the taxes applied are even smaller, and they could reach 24%.
For the winnings to be reported, a W-2G form has to be completed. That requires your data and the amount of money you won.
Some of your losses are deductible. But…don’t get too excited about that because you can claim a part of the money back. Also, get ready to present all your documents related to your winnings or losses before receiving any money.
Files like the name of the player you gambled with, the casino address, how much you bet and how much you lose will be required. It’s a complex process that will be reported using a TDS file. According to the sources, only 31.2% is charged from all the deductions you can claim.
Tax Side Effects of Gambling
The tax side effects of gambling are different all around the world. And yet, gambling is very important for many governments nowadays as it generates billions if not trillions of dollars for the economy. Let’s take India as an example. According to the Income Tax Act under section 115BB gambling incomes are taxed.
The 30% that is withheld when you make a withdrawal goes to the state. If we take into account that more than 40% of the Indian population (approximately 54 million gamblers) play at offshore casinos and 30% of their winnings are going to the state, just think about how much it contributes to the overall economy. The taxes that are applied have beneficial side effects for the state even if it’s quite high for punters.
Fact. Even if the taxes applied for gambling are a boost for the economy, did you know that online and offline gambling is prohibited in India? Only horse racing and lotteries are legal over there. The law is in a grey area when it comes to offshores casinos, and many gamblers try their luck out in casinos that accept Indian players.
Social Security Income
If you did not know, the social security income mission is to economically protect the elder citizens. When you pay taxes, you pay for the one that retires. The same thing applies when you will retire. And yes, gambling winnings contribute to social security. The only exception is the lottery games.
Once you win both you and the casino have to complete the W-2G file. Depending on the amount of money you won, a part of them will also go to the social security income. Apart from the winnings, your losses will have an impact as well on the social security income as they are itemized deductions. Your losses are used as tax returns but only when it is equal to the money you won in a casino.
When you start and gamble, make sure to learn everything about the social security income. And, if you have any questions, feel free to ask a specialist and get the professional help you need.
Health Insurance Subsidies
At this point, you learned all you need about the winnings reports, the losses documentation, the tax effects, and the social security income. But…what about the health insurance subsidies when it comes to gambling?! In case you weren’t informed if you win lots of money while gambling, there is a high chance for you to pay a larger tax. But, how did this happen?!
Well, gambling winnings are a part of your Adjusted Gross Income/AGI. AGI will include all of your incomes, even if we talk about dividends and gambling winnings. A player needs to report their winnings and report them to the IRS. Why is this relevant? AGI is used to calculate the premium tax credit/PTC. If your income is bigger, it means that you have to pay a small income on PTC and vice versa. Based on that you can pay more or less on your health insurance.
Online Gambling Accounts
When you open a gambling account is it free or you shall pay for it? Well, even if you have to pay and report all your taxes, the registration process in an online platform is free. All you need to do is to find a legal and safe casino that accepts Indian players and create an account.
When you do that, make sure to provide your data just as it appears in your ID. Once you do that, you can make your first deposit (based on the website you are playing at it could be commissioned) and claim the registration bonus. Then, select the game you want to play and let your luck and intuition guide you.
It is highly recommended to pass the KYC process after the registration in order to withdraw your funds.
Even if it looks difficult at first, reporting your earnings or your losses is a simple process and it’s not as problematic as it looks. Just make sure to complete the forms required and keep a keen eye on the taxes you have to pay.