News Mania Desk/Agnibeena Ghosh/14th August 2024
As the dust settles from the thrilling Olympics, where athletes like Neeraj Chopra, Manu Bhaker, Sarabjot Singh, Swapnil Kusale, Aman Sehrawat, and the Indian hockey team dazzled with their performances, a new question arises: will these medalists face a taxing time with their rewards? The anticipation of rewards, including cash prizes, gifts, and other perks, often brings with it the concern of taxation.
Neeraj Chopra, whose stunning javelin throw earned him a silver medal, and Manu Bhaker, Sarabjot Singh, and others who contributed to India’s medal tally, are set to receive substantial rewards. Traditionally, such accolades come with a generous outpouring of support from both government and private sectors, including cash awards, cars, houses, and various gifts. However, where there is substantial income, tax considerations are inevitable.
In France, where medal winners receive cash prizes of Rs 80,000 for gold, Rs 40,000 for silver, and Rs 20,000 for bronze, taxes are deducted from these amounts. In contrast, Indian athletes enjoy a more favorable situation. According to a 2014 notification by the Central Board of Direct Taxes (CBDT), rewards from the central or state governments for Olympics, Commonwealth, or Asian Games medalists are exempt from tax under Section 10 (17A) of the Income-Tax Act.
Manu Bhaker, who clinched two medals at the Paris Olympics, and Sarabjot Singh, both of whom received significant cash rewards under the Ministry of Youth Affairs and Sports’ scheme, are likely to benefit from this tax exemption. Similarly, rewards given to the Indian hockey team by the Punjab and Odisha state governments will also be tax-free.
Historical precedents reinforce this practice. For example, in 2018, the Income Tax Appellate Tribunal ruled that the Rs 96 crore awarded to shooter Abhinav Bindra, India’s first individual Olympic gold medalist, was exempt from tax, as it was received from the government.
The tax implications for medals themselves are less clear. Until recently, the US taxed its medalists on the value of their medals in addition to rewards. However, since the passage of the Appreciation for Olympians and Paralympians Act in 2016, athletes are taxed on medal values only if their annual income exceeds $1 million. In India, tax laws do not explicitly address the taxation of sports medals, and the judiciary has yet to make a definitive ruling on this matter.
Gautam Nayak, a tax partner at CNK & Associates, argues that a medal does not qualify as “jewelry” under Section 56(2)(x) of the Income-Tax Act, which lists movable property such as land, buildings, shares, and jewelry as taxable if the value exceeds Rs 50,000. Since medals do not fit these categories, they may not be taxable.
On the other hand, gifts from private parties, including employers, are subject to tax if their value exceeds Rs 50,000. Such gifts are categorized under “Income from Other Sources” and taxed at applicable slab rates. Employers are responsible for deducting tax at source for such gifts. However, gifts perceived as appreciation for performance rather than employment-related may not be taxable as salary but as income from other sources.
International tax considerations also come into play for sponsorship income earned abroad. For example, if an Olympic medalist earns sponsorship income in France, the India-France tax treaty would determine the tax implications and potential relief for double taxation.
In summary, while Indian athletes are generally shielded from taxation on government rewards, the taxation of private gifts and international earnings can be more complex, highlighting the need for careful tax planning and consultation.
