by Anurag Yadav
Abstract: This article is talking about the issue whether monetary rewards given to medal winners of the Olympics are taxable? It also tell about the important section 10(17A) which clear about this question and also the Central Board of Direct tax, Circular that clears doubt regarding this question and also the judgment related to rewards given to Abhinav Bindra.
INTRODUCTION: The once in four years prestigious sporting event, which was originally scheduled to be held in 2020 is being held from July 23 to August 8, 2021, amid COVID-19 pandemic in which U.S.A topped the list and India won 7 medals. Neeraj Chopra, Indian Javelin thrower has created history by becoming the first ever Indian to win an Olympic gold in the track and field events at the 2020 Tokyo Games and also the second ever athlete from India after shooter Abhinav Bindra to win an individual Olympic gold. It’s raining rewards for Neeraj after securing second gold for the country as Haryan government announced 6 crore and 50% concession in land anywhere in Haryana, 2 crore by Punjab Government, 1 crore by BCCI, 2 Crore by Byjus, CSK announced 1 crore and many others. Other players and Indian women hockey team who also brought Silver and Bronze medal also received monetary assistance from government and Other organisations. But the Major concern is Whether all these rewards or monetary assistance to Olympic players are taxable or not? To know answer of this question we have to look over the various legislations i.e Income tax act,1995, CBDT order 2014 and various other related aspects.
What does Section 10(17A) of Income Tax Act,1995 says ?
Section 10(17A) in The Income- Tax Act, 1995
(17A) any payment made, whether in cash or in kind,-
(i) in pursuance of any award instituted in the public interest by the Central Government or any State Government or instituted by any other body. and approved by the Central Government in this behalf; or
(ii) as a reward by the Central Government or any State Government for such purposes as may be approved by the Central Government in this behalf in the public interest;
will be exempt.[1]
What does Central Board of Direct Taxes, Circular No. 2/2014 stipulates?
The Central Board of Direct Taxes had issued Circular No. 447 (hereinafter called “the Circular”) on 22nd January, 1986 clarifying that awards received by a sportsman, who is not a professional, will not be liable to tax in his hands as the award will be in the nature of a gift and/or personal testimonial.
The said Circular was applicable in a tax regime when gift was not taxable in the hands of the recipient and with the fundamental change in the manner of treatment of gift by amending the definition of income under sub-section (24) of section 2 by introduction of sub-clauses (xiii), (xiv) and (xv) therein and insertion of clauses (v), (vi) and (vii) in sub-section (2) of section 56 of the Income-tax Act, 1961 (‘Act’), the gifts became taxable in the hands of recipient w.e.f. 1-4-2005. The said Circular No. 447 had therefore become inapplicable with the change in law and is to be treated as overridden by the aforesaid statutory provisions w.e.f. 1-4-2005.
Further, in terms of provisions of clause (17A) of section 10, Central Government approves awards instituted by Central Government, State Government or other bodies as also the purposes for rewards instituted by Central Government or State Government from time to time. Tax exemption can be sought by eligible persons in respect of awards or rewards covered by such approvals.[2]
Landmark Case law to answer this question is given below:
To know the answer, let’s revisit the case of Abhinav Bindra, who won gold at the Beijing Olympics in 2008. Bindra received Rs 4.81 crore in cash. The Income Tax Department demanded tax from him under Section 56(2)(v) of the Income Tax Act.
Bindra appealed to the Income Tax Appellate Tribunal (ITAT), arguing that the amount should not be taxed in view of Circular 447 issued by CBDT, which says only income received by a professional sportsperson shall be taxable, clearly implying a non-professional sportsperson is not liable to pay any tax. The ITAT ruled in Bindra’s favour. It held that no tax is required to be paid since he’s an amateur shooter and sum received by him is not in the nature of income.
A similar view was taken in the case of cricketers Kapil Dev and G.R. Viswanath. Now what distinguishes a professional from an amateur sportsman? Since the I-T Act does not define a “professional”, whether a sportsman is a professional or a non-professional is decided based on facts and circumstances of each case. Further, awards and prizes received from any government or on its behalf are exempt under Section 10(17A) and from local authorities or trusts and funds are not taxable as per Section 56(2)(vii). Also, there is no special tax that covers such rewards. It can be safely assumed that an amateur sportsperson or a non-professional sportsperson actually gets all the sum of the prize as there’s no tax payable on it.[3]
CONCLUSION AND SUGGESTION
After a brief discussion on the topic whether monetary rewards given to medal winners of the Olympics are taxable ? We studied the Section 10 (17A) of Income tax act 1995 And CBDT Circular No. 2/2014 and we came to know that the rewards given by central and state governments are not taxable. So all rewards given by the central and state government to Olympic players are not taxable, thus it means these awards received by Olympic players are exempted. But the awards that are given to them by other organisations like Byju’s, BCCI, CSK etc in case of Neeraj Chopra and other players are taxable and CBDT Circular stipulates that rewards are the gifts to the Olympic players that’s why gift should be exempted. In Landmark judgement of Abhinav Bindra,Income Tax Appellate Tribunal (ITAT) held that non professional players who are amateur play for hobby not as a profession are exempted from tax as it was not their source of income. The rewards given to Olympic players should be totally exempted from tax as this is not the source of their income and these are the gifts rewarded to them unilaterally from the organisation. Although Central and State government rewards are exempted but besides this the reward given by Organisation like Byju’s ,BCCI,CSK etc should also be exempted from tax.
Tags: #Olympic #Tokyo Olympic 2020 #Medal winners #Abhinav Bindra #Neeraj Chopra # Section 10(17A) of Income tax act, 1995 # CBDT #Monetary awards # Not taxable #Income tax appellate tribunal
[1] Available at: https://taxguru.in/income-tax/taxability-awards-u-s-10-17a-awards-professional-sportsman.html (Last visited August 27 2021)
[2] CIRCULAR NO. 2/2014 [F.NO.199/01/2014-ITA.I], Available at: httCNNET.zesncometaxindia.gov.in/Communications/Circular/Circular2_2014.htm#:~:text=Further%2C%20in%20terms%20of%20provisions,Government%20from%20time%20to%20time. (Last visited August 27 2021)
[3] Available at: https://m.economictimes.com/wealth/tax/olympic-medal-winners-wont-have-to-pay-tax-on-cash-prizes/articleshow/53993146.cms (Last visited August 27 2021)
[4] Picture: NBC
PROLAWFIC 