According to the rules specified by Income Tax Act 1961, Indian players are charged 10% TDS(Tax Deducted at Source) on the total bid amount, while Foreign players are charged TDS(Tax Deducted at Source) @ 20%.
After deducting TDS(Tax Deducted at Source), the players should file their Income Tax Return (ITR) to pay tax on their net income.
However, foreign players will be charged TDS(Tax Deducted at Source), as income tax will be payable in their home country or the country where they hold residential status.
Though you might be shocked to know that The Board of Control for Cricket in India (BCCI) is not required to pay tax on the income generated through IPL.
|TAX||INDIAN PLAYERS||OVERSEAS PLAYERS|
|Taxability of IPL Earnings||Yes||Yes|
|TDS Rate @||10%||20%|
|Deduction from Income||Allowed(to the extent of relevant expenses incurred in the pursuit of profession)||Not Allowed|
|Additional Tax To Be Paid||May be required. The amount would depend on the Net Income(after inclusion of non-IPL income & deduction of expenses)||NIL(if no other income has been earned in India during the financial year)|
|Filing of Income Tax Returns||Required||Not Required|
According to The Income Tax Appellate Tribunal (ITAT), the objective of BCCI is to promote cricket, and thus, their income shall remain exempt.
However, this exemption is valid only till BCCI uses the income generated in the promotion of cricket to satisfy its objective.
Tax Paid By Foreign Players In India
According to the Income Tax Act, 1961 income earned by any non-resident sportsman is taxable under section 115BBA at the rate of 20 percent.
They are not even allowed to claim a deduction on the expenditure incurred by them on this income.
This income also includes the money earned through advertisement, endorsements, and contributions to newspapers, magazines, or journals.
If the payer deducts tax on income earned by foreign players in the auction and these players have not earned any other income in India they are given a tax relief by the authorities for not filing their return of income in India.
However, they are required to complete all the compliances that CBDT (Central Board of Direct Taxes) has issued through a notification for all those players who stay in India for more than 120 days.
According to this notification, players are required to obtain a tax clearance certificate from the tax authorities before leaving India as required under section 230 of the Income Tax Act, 1961.
Foreign players also get the benefit of Double Taxation Avoidance Agreements (DTAA) signed with India.
DTAAs usually specify a separate article (mainly Article 17) that deals with the incomes of entertainers and sportspersons who perform internationally.
Most DTAAs entered into by India provide for taxation of incomes earned by such foreign sports players in the country of source.
Tax On Indian Players
Indian players are taxed as per the income tax slab rates applicable to them.
Also as Sec 194J treats these services as “professional services”, the payer is required to deduct the tax at the rate of 10 percent at the time of payment if the amount exceeds Rs 30,000 during the year.
Domestic players whose gross receipt is less than Rs. 50 lakhs can take the advantage of presumptive taxation.
Section 44ADA states the clauses of presumptive taxation.
According to this section if someone opts for the presumptive scheme then there 50 percent of the gross receipts is assumed to be presumptive income which is liable to tax.
Presumptive taxpayers also enjoy the exemption from maintaining books of accounts.
Also Read: How Many Foreigners Can Play In Ipl?