Olympic Medal Winners Won't Have To Pay Tax On Cash Prizes

It's raining prizes for the Olympic medal winners. Rs 13 crore in prizes has been announced for P.V. Sindhu, which includes Telangana government had given Rs 5 crore, Delhi government had given 2 crore, Andhra Pradesh government had given rs 3 crore. Sakshi Malik has received a cheque of Rs 2.5 crore from the Haryana government.

Indian Railways, Bharat Petroleum and IndianOlympic Association have also chipped in with cash prizes for them. Now the question is: how much will they have to pay in taxes?

The answer to the question is in the examples, the case of Abhinav Bindra, who had won a gold medal at the Beijing Olympics in 2008. Bindra received Rs 4.81 crore in cash. The Income Tax Department demanded tax from him under the Section 56(2)(v) of the Income Tax Act.

Bindra appealed to the Income Tax AppellateTribunal (ITAT), arguing that the amount should not be taxed in the view of Circular 447 issued by CBDT, which says that only income received by a professional sportsperson will be taxable, clearly implying a non-professional sportsperson is not subjected to pay any tax. The ITAT ruled in Bindra's favour. It held that no tax is required for him to pay since he is an amateur shooter and the sum received by him is not in the nature of income. 

Similarly there is another example of the cricketers Kapil Dev and G.R. Viswanath. Now what distinguishes a professional from an amateur sportsman? Since the Income Tax Act does not define a "professional", whether a sportsman is a professional or a non-professional is decided based on the facts and the circumstances of each case. Further, the awards and the prizes received from any government or on its behalf are exempt under the Section 10(17A) and from the local authorities or trusts and funds are not taxable as per the Section 56(2)(vii). There is also no special tax that covers such rewards. It can be safely simulated that an amateur sportsperson or a non-professional sportsperson actually gets all the sum of the prize as there is no tax payable on it. 

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