Gukesh Dommaraju, the chess sensation from India, returned grandly on Monday after clinching history for himself in Singapore with a historic win at the 2024 FIDE World Championship on Monday. At just 18 years old, Gukesh is now the youngest chess world champion to have come from India, after Ding Liren of China was defeated on December 12 in the final.
Gukesh’s phenomenal victory not only won him international accolades but also a handsome prize money of ₹11.45 crore, distributed by the International Chess Federation (FIDE). However, this handsome reward comes with one significant cost – the tax levied on prize money of Gukesh.
How much tax will Gukesh pay on his prize money?
Under Indian tax laws, there is a tax deduction at source from prize money. Section 194B and Rule 26 of the Income Tax Act call for a tax rate of around 39-42% on winnings from games or contests. In Gukesh’s case, this may result in the payment of ₹4.5-₹4.8 crore in taxes, bringing the amount of net earnings drastically below the amount earned.
Experts comment that, in the new tax regime which is now the default for the individual, Gukesh can avail of a deduction rate which is 39% in contrast to 42.744% under the old system. Despite this minor relief, prize money is heavily taxed.
Breakdown of Prize Money
FIDE’s rules allocate $200,000 (around ₹1.68 crore) to players for each game won. Gukesh triumphed in three games, earning $600,000 (₹5.04 crore). The remaining prize pool of $1.5 million was divided equally between Gukesh and Ding, adding to his total winnings.
Adding to the celebrations, Tamil Nadu Chief Minister MK Stalin declared a ₹5 crore reward for Gukesh’s global feat. Yet, this reward too would have tax deductions, unless it satisfies the exemption available under Section 10(17A) of the Income Tax Act matter still in debate within legal circles.
While Gukesh’s victory is a moment of pride for India, the taxation aspect underscores the financial realities faced by sports professionals, even after groundbreaking achievements.
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