With Tokyo Olympics ending today India has although not won lot of medals and has won only 1 Gold in Tokyo Olympics 2020 but this 1 Gold is very important because as it is the first gold won by India in athletics in Olympics.
Now, coming to the person who has made India won the Gold in Olympics is Neeraj Chopra who is a Javelin thrower and the throw which made him win this gold was of 87.57 meters and he won the gold medal on Saturday 07.08.2021 after which various campaigns were started and various rewards/ prizes have been announced to celebrate the win of Neeraj Chopra in Olympics.
Neeraj Chopra is from Haryana and below are various prizes or rewards announced in his name after his win and there could be many more but below are a few which we know till now:
- Haryana Government has announced a Rs. 6 crore cash prize, land at 50% concessional rate along with a class I category government job, even though he already holds a rank in the military.
- The Punjab government has announced a cash reward of Rs 2 crore.
- Board of Control for Cricket in India (BCCI) announced cash rewards for all medal winners, including Rs 1 crore cash price for Neeraj.
- Manipur cabinet has also extended their support with a Rs 1 crore cash reward.
- Indian Premier League (IPL) franchise Chennai Super Kings (CSK) has announced a cash reward of Rs 1 crore and will be creating a special jersey with number 8758 commemorating Neeraj’s throw distance that won him the gold medal.
- Indian online education app BYJUs has announced a cash prize of Rs 2 crore for Neeraj Chopra.
There are various other non-cash prices which have been announced for Neeraj Chopra which includes
- Businessman Anand Mahindra has announced a gift of SUV XUV 700 for Neeraj.
- Indian airline IndiGo has announced unlimited free travel for Neeraj for one year.
If we look at the cash price it roughly totals to around Rs. 11 crore and this does not include non-monetary rewards.
Similar was the case when Abhinav Bindra had won a gold in Olympics in 2008 wherein Assessing officer had asked him to pay tax on all such prized but in the end it was ruled in the Delhi ITAT that Abhinav Bindra was not a professional player/ sportsperson and hence he was covered by circular 447 of 1986 which said that any prize received by non-professional sportsperson would not be considered as income and hence not liable for tax.
We have discussed the whole case in detail here: No tax payable by Abhinav Bindra on rewards received for winning India’s first gold medal at Olympics – Taxontips
Although from 01-04-2005, gift were made taxable in the hands of recipient but government had not withdrawn the above circular and hence Abhinav bindra was able to take benefit of this circular.
However, the judgement was announced in 2013 and in 2014 CBDT had issued a circular – 2/2014 wherein the above circular no. 447 was withdrawn and in the above circular it was told that such withdrawal shall be retrospective in effect i.e. from 01.04.2005.
Thus, now any gift received by any person above Rs. 50,000 shall be taxable in the hands of recipient under the hand Income from other sources.
The gift would first be covered under Income from other sources by virtue of section 56(2)(x) which covers:
“(x) where any person receives, in any previous year, from any person or persons on or after the 1st day of April, 2017,—
(a) any sum of money, without consideration, the aggregate value of which exceeds fifty thousand rupees, the whole of the aggregate value of such sum;“
Then such amount would be covered under the definition of income by virtue of section 2(24)(xviia) which is reproduced as under:
“(xviia) any sum of money or value of property referred to in clause (x) of sub-section (2) of section 56;”
Therefore, if we consider these prizes as his only income which comes to around Rs. 11 crore and calculate tax on same based on the slab rates as this income would be taxable under the head ‘Income from other sources’, the tax would come to around Rs. 4.68 crores which includes Rs. 3.28 basic tax, Rs. 1.21 crore surcharge and Rs. 18 lakh cess and the gold medalist will have to pay highest surcharge i.e. 37% surcharge.
However, there is still one section which can come to the rescue of the athlete and save some tax which is section 10(17A) of the Income tax act which is as under:
“(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;”
This is the only section under Income tax act which can save some tax on the prizes rewards announced otherwise out of the Rs. 11 crores announced by various authorities for Neeraj Chopra Rs. 4.68 crore would go as tax and he would be left only with Rs. 6.32 crores.
Further, the above section also could only help the athlete to save tax on rewards and prizes which he shall receive from state and central government but he will still have to pay tax on rewards received from BCCI and Chennai Super kings as same would not fall under the above provision.
Also, the prizes or rewards from government would only be exempt only if same is approved by government in public interest.
Now, let’s see how the tax would be charged on the Olympic Champion next year and what relief could he get from the Income tax department or Central government against such heavy taxes.
To download Circular 2/2014 CLICK HERE.
Disclaimer: The views presented in the above article are personal views of our team and has no legal binding. For any legal opinion consult a tax professional.
You can book phone consultation/ assistance online with expert as mentioned below:
To book ITR filing with experts CLICK ME.