Olympic medallists prize money Taxability

Olympic medallists earned fame & deserves tax free prize money

Neeraj Chopra created history by becoming the first-ever Indian to win a gold medal in athletics in the history of the Olympics, and it is raining praises and prizes for him. Other winners of silver and bronze have also been bestowed with a pat on the back and money in the hand. While the players have become rightfully richer, people like you and me are summing up the reward money awarded to these players. Being a tax freak, I thought of checking on the taxability of the rewards received by all these players.


Are such prizes, whether in cash or in-kind tax-free?


Section 10(17A) of the Income Tax Act authorises the Central Board of Direct Taxes (CBDT) to declare certain rewards as tax-free given by the Central and State Governments in the public interest. Though this provision has been in the law book since 01-04-89, CBDT, as late as on 28-01-2014, passed an order making reward in cash or kind received by any medal winner in Olympic Games, Common Wealth Games and Asian Games tax-free.

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Section 10 (17A) of the Income Tax Act provides for exemption in respect of rewards given only by the Central Government and State Governments tax-exempt in the players' hands. It does not make the prizes announced by other authorities like a local authority, sports authority or an industrial house etc., tax-exempt. So the prizes like an SUV announced by Mr Mahindra for Neeraj Chopra does not come tax-free in his hand, and he will have to shelve out 30% from his pocket unless Mr Mahindra is generous enough to fund the tax also in respect of the value of the SUV.


Interestingly, the reward money given by any State Government to the Olympic medal winner is exempt and not only from the State Government in which the medal winner belongs. So, the reward money of Rs. 6 Crores announced by the Haryana government and the reward of 2 Crores announced by Punjab Government and one crore by Manipur government to Mr Neeraj Chopra would be wholly exempt in his hands.


For whom it is exempt and for whom it is taxable


The CBDT order categorically states that the reward money to the medal winner only is exempt. So the prize of Rs. 50 lakhs to the 9 players of the Indian women’s hockey team from Haryana announced by the Haryana Government will not be tax-free in their hands as they are not the winner of any medal. Likewise, the reward money, if any received by the coach of these players even announced by any government, will not be tax-free in their hands.

Tax rates and deduction of tax at source


The award money that does not enjoy the tax exemption as explained above will have to pay tax at a flat rate of 30%. The payer of the prize money in cash must deduct tax at 30% at the source. In case of a prize in kind, either the player will have to pay the TDS amount to the person giving the prize in kind. Alternatively, the giver of the prize in kind can gross up so prize money so that the player does not have to shelve tax from his pocket.

 



For more information on this, visit www.taxaj.com.
Posted by Pooja
Team Taxaj


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