India’s young chess prodigy D. Gukesh made headlines with his spectacular victory at the 2024 FIDE World Championship, earning an impressive ₹11.45 crore in prize money. While this remarkable feat has brought immense pride to the nation, the spotlight now turns to an intriguing question: Will his prize money be taxed, or can it escape taxation under Indian law?
Under Section 10(17A) of the Income Tax Act, 1961, awards granted in the public interest by the Central Government, a State Government, or bodies approved by the Central Government are exempt from taxation. However, the International Chess Federation (FIDE), which conferred the prize, is not recognised as a government-approved body under this provision. As a result, the exemption under Section 10(17A) does not directly apply to Gukesh’s winnings.
Prize money from games like chess is taxed at a flat rate of 30% under the Income Tax Act, with no deductions allowed for expenses. In Gukesh’s case, this taxation framework means his earnings could attract an effective tax rate of 39% under the new tax regime, factoring in a 25% surcharge and a 4% Health and Education Cess.
If he opts for the old tax regime, the tax liability could rise to 42.744%, owing to the higher maximum surcharge of 37%. This could mean paying approximately ₹4.46 crore in taxes under the new regime and potentially more under the old regime.
Another crucial factor is Gukesh’s tax residency status. If he is a resident of India for tax purposes, his global income, including the chess prize, would be taxable in India. On the other hand, if he qualifies as a non-resident, only the income earned in India would be taxed. However, since the prize money was earned through an international championship, it falls within the taxable bracket in India, irrespective of his residency status.
While Section 10(17A) may not apply, Gukesh might still explore other avenues to reduce his tax burden. Tax planning through exemptions, credits, or international agreements, if applicable, could play a role in mitigating the liability. Additionally, he could potentially offset some of the burden through rebates or deductions in his overall tax calculation, subject to Indian tax laws.
For now, the exact tax implications remain uncertain, and expert consultations are likely to guide Gukesh’s next steps. His journey reminds high-earning individuals to remain vigilant about tax laws and proactively explore legal avenues for tax optimisation.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
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