The Olympics and New Financial Rewards
The Olympic Games are not just a global sports event; they are a platform for international diplomacy and a celebration of unity and excellence. With the Paris Olympics 2024 on the horizon, the World Athletics body has introduced a prize money of USD 50,000 for gold medalists in track and field. This is a significant development, recognizing the hard work and achievement of athletes in these events. Indian javelin thrower Neeraj Chopra, who clinched gold at the Tokyo 2020 Olympics, is among those who could benefit from this new policy, considering his consistent performance on the international stage. In addition, there could be various Indian athletes trying to win the coveted spot in the track and field event.
Decoding the Tax Rules for Prize Money earned from Sporting Events
When it comes to taxation, the location of the event plays a crucial role. For competitions held within India, athletes are taxed regardless of their residency status. For international events like the Olympics, different rules apply:
Resident athletes are taxed on their worldwide income, which includes prize money from events held abroad.
Non-resident athletes do not face taxation in India concerning the prize money if the competition occurs outside Indian territory.
Once established that a sportsperson is a resident, such winnings are taxed at a flat rate of 30% by a harmonious reading of sections 2(24), 56(2), and 115BB of the Income Tax Act, which broadly covers income from games and competitions. The Supreme Court, in the case of G.R. Karthikeyan v. CIT, emphasized that the term 'other games of any sort' has a wide scope, meaning that Olympic winnings fall firmly within this category. Thus, these earnings are subjected to a higher tax bracket of 30% on a gross basis, along with any applicable surcharge and cess.
Advocating for Fair Tax Treatment
Given the monumental effort athletes put into their training and competition, the current tax structure may seem quite stringent. Winning an Olympic medal is a pinnacle of achievement, and the rewards associated with such victories are meant to honour the athletes' dedication. However, the existing tax laws do not provide any exemptions for Olympic winnings unless there is a reward directly from the Government of India, as per section 10(17A) of the Act.
This brings us to the need for a re-evaluation of these tax policies. With the immense physical and emotional investment these athletes make, it is only fair that the government considers implementing specific tax exemptions for Olympic prize money. Such a move would not only provide financial relief to the athletes but also acknowledge their contribution to elevating India's stature on the world stage. This is especially crucial considering that the tax implications in other countries, like France, may differ and potentially compound the athletes' tax burdens.
Conclusion
As stakeholders in Indian sports and taxation, we need to advocate for policies that recognize and reward the efforts of our athletes fairly. Supporting changes in the tax legislation in the upcoming budget after evaluating the overall tax impact and considering the possible tax implications in France would go a long way in ensuring that our athletes are supported as much off the field as they are cheered on it.