D Gukesh's Rs 11.45 crore chess prize: Can it escape taxes under Section 10(17A) of Income Tax Act?

India's young chess prodigy, D. Gukesh, made history by earning a remarkable Rs 11.45 crore in prize money after winning the 2024 FIDE World Championship.

While his achievements have brought immense pride to the nation, the big question doing the rounds is: Will this substantial prize money be taxed under Indian law? The taxation of such earnings depends on various factors, including the nature of the prize, its source, and Gukesh's tax residency status.

Let’s delve into the complexities of Indian tax regulations to determine how this could impact the rising chess star.

Under Section 10(17A) of the Income Tax Act, 1961, any payment, whether in cash or kind, made as an award or reward in the public interest is exempt from tax, provided it is granted by the Central Government, a State Government, or any other body approved by the Central Government. However, as the award granted to Gukesh has been conferred by the International Chess Federation (FIDE), a global governing body for the sport of chess, it does not qualify as a body approved by the Central Government of India.

Therefore, the exemption under Section 10(17A) is not applicable, as the benefit of this provision is limited to awards from the Indian Government authorities or bodies approved by the Central Government.

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CA (Dr.) Suresh Surana, said, "In case where an assessee receives income from winning games, such winnings are subject to taxation at a flat rate of 30%, as per the provisions of the Income Tax Act. This rate applies regardless of the assessee's other income and tax slab. Notably, this tax is levied on the gross winnings, with no deductions allowed for expenses."

"In Gukesh's case, since the prize money is received from winning a chess game, the aforementioned provisions apply. Therefore, if he opts for the new default tax regime, he would be liable to pay tax at the effective tax rate of 39% (base rate of 30%, along with a surcharge of 25% and a Health and Education Cess of 4%). Consequently, the net tax payable by him is approximately Rs. 4.46 crores. If Gukesh opts for the Old Tax Regime, the tax liability could be higher at 42.744%, as the maximum surcharge under this regime is 37%," added Surana.