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IPL and the Taxman

IPL-7 is finally over. The cheers have been replaced by silence. When the event was on, you were cheering, your eight-year old son was cheering, your eighteen-year old niece was cheering and your eighty-year old grandma was cheering. If you thought, the loudest cheers were in your home, you were wrong. No, the cheers in the stadia were not the loudest either. Surprise, surprise. The most boisterous cheers rang out from one of the most solemn places known to you and us - the offices of the Income Tax Department. Surprised? Confused? Well, there is no reason to be.

 

As spectators, IPL (Indian Premier League), for all of us, has always been about glamour and entertainment. However, for the organizers, the performers and the broadcasters, IPL has always been about money, money and more money.

 

IPL could well stand for Indian Prosperity League judging by the quantum of money that it generates for everyone associated with it. The organizers rake in the moolah. The players enrich themselves in the span of a few weeks. One look at their paycheck and the umpires know that by participating in the IPL, they had made the correct decision (no referring to third umpire required). The TV presenters can’t stop smiling even after the cameras have been switched off. As for the broadcasters, if they had their way, the IPL would be a monthly event, not an annual affair.

 

Where there is a human being, there is bound to be a shadow. Where there is money, there is bound to be a tax. In this lies the genesis of the taxman’s joy and happiness. Income generated from IPL could flow in the direction of either domestic or foreign individuals/entities. Irrespective of its destination, such income has to suffer tax. The taxman makes sure of that.

 

Since the IPL spotlight is chiefly trained on the players, let us try and understand the impact of tax on their earnings.

A player's earning from IPL could be in any or all of the following ways.

  1. Franchisee bid prize for a player to play the entire tournament e.g. Rs.14 crores for Yuvraj Singh, Rs.12 crores for Dinesh Karthik, Rs.9 crores for Kevin Pieterson in IPL-7.
  2. Player performance awards viz., Man of the Match, Maximum Sixes, others.
  3. Advertisement / endorsement fees.
  4. Share in the prize money (this year’s winners pocketed Rs.15 crores while the runners-up received Rs.10 crores).           

TDS or Tax Deduction at Source is effected on all payments to the players. The rate of TDS varies depending on whether the recipient is an Indian or overseas player. TDS @ 10% is deducted on all payments made to Indian players. Payments made to overseas players are subjected to TDS @ 20%.

 

Domestic players must include their IPL earnings while computing their income for the financial year and pay the differential tax liability, if any, before filing their income tax returns. The income that is liable for tax is arrived at after deduction of relevant expenses incurred by them in the course of pursuing their profession.

 

The table below highlights the differential tax treatment meted out to the IPL earnings of local and foreign players.

 

 

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.

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

 

For players, IPL is all about hits and misses. A batsman could play the knock of his life or incredibly miss a juicy full toss. A bowler could be overjoyed after bagging a rich haul of wickets or feel miserable after being plundered for plenty of runs. A fielder could pull an out-of-the-world catch or miss a straightforward chance. However, for the taxman, IPL is always about hits and no misses. Year after year, the IPL keeps getting bigger and richer resulting in the players’ purses getting fatter and stouter. However, after every IPL, more than any of the players, it is the taxman who laughs loudest all the way to the bank (or should we say, treasury) and more than the organizers and broadcasters, it is the taxman who keenly awaits the next episode of IPL.

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