chess champion D Gukesh
India’s newly crowned World chess champion D Gukesh, returned to India on Monday. The young Indian chess grandmaster won the 2024 FIDE World Championship after defeating Ding Liren of China in the final in Singapore on December 12.
The Indian chess grandmaster, who is 18 years old, is set to become a multi-millionaire. The International Chess Federation (FIDE) will award him a whopping ₹11.45 crore as prize money. However, the young chess grandmaster will also have to pay a hefty tax on his prize money.
D Gukesh’s prize money breakdown
According to FIDE’s rules, each player will receive $200,000 (about ₹1.68 crore) for each game they win. The rest of the prize money will be split equally between the two competitors.
The Indian chess player won three games in the championship, and hence he is likely to earn $600,000, approximately ₹5.04 crore.
Mint reported earlier that the remaining $1.5 million was equally divided between Gukesh and Ding, bringing Gukesh’s total prize money to ₹11.34 crore (estimated amount).
How much tax does Gukesh have to pay on FIDE prize money?
The Indian chess player is likely to pay around 39-42 per cent of his prize money as tax as per Section 194B, Rule 26 of the Income Tax Act.
The provision mandates the deduction of tax at source (TDS) on winnings from lotteries, crossword puzzles, card games, and other games of any sort. Under the new tax regime, the chess champion can get some relief.
“The new tax regime, now the default framework for individuals, may offer some relief to D Gukesh with a tax deduction rate of 39 per cent (compared to 42.744 per cent under the old taxation regime) – equivalent to approx. ₹4.5 crore – following the provisions of Section 194B read with Rule 26 of IT act,” says Amit Baid, Head of Tax, BTG Advaya.
Tamil Nadu CM announces ₹5 crore reward to Gukesh
Tamil Nadu Chief Minister MK Stalin also announced a reward of ₹5 crore to honour Gukesh’s achievement on the global stage. The reward amount might also be subject to a tax deduction.
Citing the Central Board of Direct Taxes circular, Amit Baid said, “Only awards instituted in public interest and approved by the Central Government can qualify for tax exemption under Section 10(17A). This raises concerns for Gukesh, as awards from the Central or State Government may not meet the exemption criteria and face a 39 per cent tax deduction under Section 194B.”
“While the Madras High Court has ruled that approval under Section 10(17A) can be explicit or implied (Vijaya Kumar (K) vs PCIT [TS-5082-HC-2020]), professional sports figures relying on this precedent may face legal uncertainties,” he added.