Is Gambling Legal In India? Here's all you Need to Know

What is Gambling?

Gambling is the risking or staking of money or any other valuable security which may be referred to as “ stakes” on an event that does not have a certain outcome with the main intention of winning more money or the good of a material value. Thus, gambling requires three essentials to be fulfilled, these are & ndash consideration or money that is the amount that is put at stake, the risk taken, and the price or the outcome of putting the money at stake. The outcome of gambling is often immediate, for example rolling dice, spinning a roulette wheel, a horse finishing a race et cetera. The outcome of gambling could also be long-term for example a future sports contest. Gambling in India is understood both in its traditional form as well as in its modern avatar. The age-old traditional gambling can be understood in the context of brick and mortar format that is in physical space, whereas, modern gambling consists of computers, mobile phones, the internet et cetera.

What is Betting?

Betting is a part of gambling. Gambling is a general term and includes betting. Betting as a term validates the activity of gambling. It is a structured agreement and is most often used in areas of sports gambling. In the modern day and age, betting has become an agreement between two persons, where one predicts an outcome and places a bet and the other person forfeits the bet or pays up the agreed money to the other person.

Laws Governing Gambling in India

Most of the gambling activities in India or under strict control. However, a few categories like horse racing and lotteries are an exception to this. Gambling in India is a state subject which means that only the state governments are entitled to formulate and govern such activities for their own states. The Public Gambling Act 1867 also known as the Gambling Act is the general law that governs gambling in India. However, since the State legislatures as per the Constitution of India have been entrusted with the regulatory leeway to form State subject gambling rules, it is the State that formulates such laws as per the requirements of such State. The Gambling Act is the central enactment that has been adopted by certain states in India and other states have formulated or enacted their own legislations to regulate and govern gambling activities within their own territory. Since most of the gambling legislations which have been enacted were done prior to the advent of online or virtual gambling or betting, thus, the gambling legislations primarily refer to gambling activities in physical form. Since the times of British rule, many states in India have enforced the gambling act, thus, prohibiting all forms of gambling and betting in their respective states. Goa and Sikkim were the only states that allowed gambling and betting, subject to regulations made by these respective states.

The Public Gambling Act, 1867

As stated earlier, the Public Gambling Act is the main Act that governs public gambling in India. The Public Gambling Act is a Central law that prohibits running or operating public gaming houses. Any violation of the law under this act could attract a fine of Rs.200 or imprisonment of up to 3 months. Main prohibitions under this Act include:

1. Owning, keeping, occupying, or having care and management of a gaming house/common gaming house.

2. Gambling in a common gaming house or being present for gambling in a common gaming house.

3. Furnishing or advancing money for the purpose of gambling to persons frequenting any such gaming house.

Many kinds of gambling are prevalent in India and have been practised in India for many years. Casino gambling, sports betting Horse racing, lottery, online gambling, school games et cetera are some of the kinds of gambling practised in the country. The legal position on gambling in India has been divided into two diverse categories that is games that involve skill and games that involve chance.

Games of Skill vs Games of Chance: Validity and Laws

The Public Gambling Act has declared that any gambling which involves the act of putting money or betting for money or any other equivalent act as illegal. However, games, where skill is needed, are the only exception to the above rule and are legal in India. Skill games have been defined by the Supreme Court as “ the competitions where success depends on substantial degree of skill or not gambling and despite there being an element of chance of a game is preponderantly a game of skill it would nevertheless be a game of mere skill” . Therefore, Horse racing or dog racing has been declared to include substantial amounts of skill and therefore these do not fall under the definition of gambling except under certain situations/conditions. Interestingly, the game of rummy was declared a game of skill by the Supreme Court. The reasoning given by the Supreme Court was that “ rummy requires a certain amount of skill since the fall of cards has to be memorized and the building up of rummy requires considerable skill in holding and discarding cards. It is mainly and predominantly a game of skill.” However a game of three cards also known as “ flash” or “ flush” was declared as a game of chance entirely and hence falls under gambling. It is thus inferred that skill games are allowed in India.

Online Gambling and Betting

The Public gambling act 1867 is an old act and does not contain any laws regarding online/internet gambling or betting. There are many online betting agencies that entice gamblers to place bets using the internet. In order to regulate and restrict online gambling in India, the reserve bank of India was authorized under the payment and settlement act 2008 to operate or start a payment system for regulating electronic payment mechanisms of all kinds in India. FDI policies have also restricted enterprises to get involved in betting lottery and gambling activities. IT intermediary guidelines rules also block access to certain types of websites and content relating to gambling. Therefore the IT act 2000 regulates cyber activities or online gambling in India in a way it gives the Indian Government the power to block or instruct foreign betting games and sites. It can be concluded that there is no explicit law that makes online betting and gambling an illegal activity in India. Theoretically, it is allowed to bet on these leading casino platforms online without running the risk of getting punished for the same. The most significant obstacles that gamblers may face in India or due to the payment portals as the RBI has instructed the banks and payment gateways not to process transactions that are related to online casino sites or gambling.

Different types of Gambling and their Legality

1. Gambling in Casinos

Gambling in a casino is said to be outside the legal ambit of illegal “ gambling” and is regulated by the Public gambling act. However, only two states - Goa and Sikkim have legalized casino gambling to a limited extent, where only five-star hotels can acquire licenses approved by the state. Goa has also allowed casino gambling on the board of an offshore ships.

2. Sports/Horse Race Betting

The Supreme Court has held that betting on horse racing was a game of skill. Most of the Gaming Enactments have carved out an exception for betting money or wagering upon horse racing. However, certain conditions are levied upon Horse Racing for it to be exempted under the Gaming Enactments. These conditions include that such betting shall take place on the specific day when the horse has run and in an enclosure sanctioned by the State Governments, etc. Turf clubs regulate betting on physical horses within their premises. Apart from the rules set by the Governments and Enactments, independent Turf Clubs set their own rules as well. Online betting on real horses would also require the conditions prescribed under Horse Racing Exemption to be met. Bangalore and Calcutta Turf Clubs had recently (during the COVID-19 outbreak), received permission from their respective State Governments to offer online betting on horse races conducted in Turf Clubs. As far as sports betting is concerned, only the State of Sikkim permits it. Under the Sikkim Act, an operator must obtain a license to offer such games in the State. These games can be offered through the internet only within the state of Sikkim.

3. Cricket Betting

No gambling laws strictly and outrightly prohibit Indians from betting on cricket, however, the Central Government looks at betting as a game of chance and not that of skill (like in horse racing). After post-2013 spot-fixing scandal, it was recommended by the Law Commission to the Central Govt. to legalize betting in India, but, under stringent control. The main reason for this was to curb money laundering. However, since internet gambling is a global business and the Indian laws do not have jurisdiction over foreign websites, the Government has set certain practices in place in order to make the use of these websites difficult.

4. Poker

It is generally argued that certain types or variations of poker are games of skill and not of chance, for the purpose of the Gaming Enactments. Therefore, such games are and should be permitted as per the Indian States (to the extent that they fall under games of skill). The Nagaland Act specifically categorises poker as a game of skill. Similarly, the State of West Bengal has specifically excluded poker from the ambit of “ gambling” under the West Bengal Gambling and Prize Competitions Act 1957. When poker is played as a game of skill, a license is not required under the Karnataka Police Act, 1963, as per the Karnataka High Court. However, the High Court of Gujarat has held that poker is a game of chance and is thus currently prohibited in the State.

5. Bingo

Bingo may or may not fall under the category, or within the ambit of “ lottery” or betting/gambling under most Gaming Enactments, since these are considered a game of chance and thus banned in most States in India.

6. Lotteries

The Central Lotteries (Regulation) Act 1998 governs government lotteries. State governments are authorized under this act to hold lotteries and to frame rules and regulations that should not intervene or contradict the Central Lotteries Act. The drawing of lotteries is restricted to one draw of lottery a week. However many Indian states have been permitted to open lottery terminals in abundance where draws take place even every 15 minutes Sikkim is one such popular state known for its gambling terminals and its regulatory framework. Sikkim has a constitutional right under the seventh schedule allowing it to create its own laws for all kinds of gambling and is thereby permitted not to follow the Central Lotteries Act. The state governments have the right to authorize lotteries within the jurisdiction and also lay down the tax clauses for the same, as per the lotteries regulation act of 1998. For example when a person plays poker online in India, tedious may be automatically deducted if they win, from their winnings.

Application for a License and License Restrictions for Gambling in India

Depending upon the type of gambling activity and the medium through which the relevant activity is sought to be offered, certain types of licenses may be required. These have been stated below:

1. Casino: Goa act and Sikkim casino Law State laws for offering casino products in five-star hotels in Goa, Daman, Diu, and Sikkim. However, licenses for offering casino products offshore in Goa dominant you are available under the Goa act.

2. Poker: Most Indian states allow operators in India to offer skilled versions of poker without a license. However, Sikkim, Nagaland, Telangana, Andhra Pradesh and Gujarat licenses for poker may be required.

3. Betting: if betting is a game of chance, it is prohibited in most Indian states. However, if betting is a case of casino games, the licenses for casinos Will apply. In case betting is for sports a horse race then licenses for Sir James will be required.

4. Sports/Horse Betting: if the betting is for physical horse races, a license will be required for keeping such horses. However foreign horse races are not included in this. Betting on horse races online does not require licenses.

5. Fantasy Betting: no license will be required if the fantasy sports game qualifies as a game of skill. However, under the Nagaland act license must be obtained for offering the said games in Nagaland.

6. Lotteries: State governments have the power under the lottery laws to appoint an individual or a corporate as a distributor or selling agent to market and sell lotteries on behalf of the organizing state. Private lotteries are prohibited in most Indian states under the Indian penal code.

7. Social Gaming: most Indian states do not require any licenses for such games.

8. Skill Games: only the state of Nagaland has an active regime for licenses for online games of skill as per the Nagaland act. Most of the games of skill operate under the exclusion of such gambling games and most gaming enactments.

Tax Levies for Gambling and Betting in India

Income Tax

Any income by way of winnings from a lottery or even a crossword puzzle or a card game or any other game exceeding INR 10,000 is subject to withholding 30% as tax (which is exclusive of the applicable surcharge and cess), as per the Indian Income Tax laws. In case the winnings are in cash + kind, or, wholly in kind, and the cash component is insufficient to honor the withholding/tax obligation in respect of the entire winnings, the payer shall ensure that the tax at the rate i.e.30% is cleared or paid before releasing the whole of the winnings to the winner/payee.

Equalisation Levy

A new tax chargeable on online services or goods (to Indian residents) supplied by offshore e-commerce operators has now been imposed. The rate of this tax is 2% of the turnover tax from sales of goods or services to Indian residents.

GST

As per the fairly new Goods & Services Tax (GST) laws, a 28% rate of tax is applicable on services by way of admission to entertainment events or access to casinos, etc. Moreover, the games that are offered under direct betting models i.e. where the players bet against the house, constitute actionable claims. If such actionable claims involve lottery, betting, or gambling, they constitute a supply of goods and are thus subject to GST @ 28% (on the bet amount). Actionable claims relating to games of skill are not subject to GST. However, in the case of peer-to-peer models, i.e. where the players bet against each other and the gaming company merely provides the platform for facilitating such betting games, constitute “ services” provided by the gaming company. Such “ services” will be chargeable to GST only if it constitutes “ ODAIR” (Online Information Database Access and Retrieval Services). ODAIR services, essentially, are those that can be provided through minimal human intervention. Currently, the following GST rates are applicable to online gaming and casino earnings:

• For a game of chance, including gambling at casinos, a 28% GST is chargeable under HSN 999692 on the total bet value.

• For a game of skills, such as esports, puzzles, and some card games, an 18% GST is chargeable under HSN 998439 only on the platform's commission/service fee or on gross gaming revenue (total stake value & ndash distributed winnings).

This tax is chargeable on the fee/amount of service that is charged by the gaming operators. However, if there is enough human intervention in providing services such as live casinos, such services would not fall under ODAIR and will or (will not be taxed) accordingly.

Need of a Lawyer

As can be seen, laws related to gambling and betting can be confusing to understand as the types are many and each attracts different provisions. Plus, since gambling is a State subject, laws for each state are different. This is why it is important to hire a lawyer if one needs help regarding gambling laws in India. A lawyer can help you defend yourself if you are stuck in a gambling case, and even if you need to complain against someone person carrying out illegal gambling activities. You can also ask a lawyer online a free legal question using LawRato's Ask a Free Question service.

Advocate Chikirsha Mohanty

4.0 | 2+ user ratings Greater Kailash - 1, Delhi
5 years

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