How world’s youngest chess champion D Gukesh’s ₹11.45 cr prize shrinks by ₹4 cr: The tax math explained

India’s taxation rules on prize money are clear: winnings fall under “Income from Other Sources,” taxed at a flat 30%. Add a 15% surcharge (for incomes exceeding ₹1 crore) and a 4% health and education cess.

Tamil Nadu Chief Minister’s generous ₹5 crore award is also subject to taxation since it does not qualify for exemptions under Section 10(17A) of the Income Tax Act.

D Gukesh, the 18-year-old chess prodigy and youngest World Chess Champion, is about to learn that victory comes with a hefty price tag.
Of the ₹11.45 crore prize money he earned from his monumental win, nearly ₹4.09 crore will be swallowed by taxes, leaving him with ₹7.36 crore in hand.

India’s taxation rules on prize money are clear: winnings fall under “Income from Other Sources,” taxed at a flat 30%.

Add a 15% surcharge (for incomes exceeding ₹1 crore) and a 4% health and education cess, and the numbers stack up quickly.

Basic Tax (30%): ₹11.45 crore × 30% = ₹3.43 crore
Surcharge (15%): ₹3.43 crore × 15% = ₹50.52 lakh
Health & Education Cess (4%): ₹3.43 crore × 4% = ₹13.74 lakh

When added up, Gukesh’s total tax liability comes to approximately ₹4.09 crore.

Neeraj Agarwala, Partner, Nangia & Co LLP, said, “The reported prize money won by chess player D Gukesh in the World Championship is taxable in India under the head “Income from Other Sources”.

Winnings from the Championship will be taxable at the applicable slab rate and the total tax liability is approximately ₹ 4-4.3 crores under the new tax regime, assuming no deductions. However, overall tax liability may be reduced by claiming deduction of expenses incurred by him for the Championship like travel, entry fees, coach fees, hotel stay etc. Any subsequent income from sponsorship or interviews will be taxable under “Income from Business & Profession” after deducting expenses incurred to earn such income.”

“It is pertinent to note that there are provisions in the Income Tax Act, that provide for tax exemption for any award or prize money received by the Government if the same is notified. However, no exemption is provided for prize money received in tournaments held outside India,” said Agarwala.

Gukesh’s winnings raise questions about double taxation, as the victory took place in Singapore.

However, since Gukesh is an Indian resident and the prize money is likely paid in India, the Double Taxation Avoidance Agreement (DTAA) between India and Singapore may not offer significant relief.

The money will be taxed primarily under Indian rules.

Gukesh’s financial reality doesn’t end there. Tamil Nadu Chief Minister’s generous ₹5 crore award is also subject to taxation since it does not qualify for exemptions under Section 10(17A) of the Income Tax Act.

Here’s the calculation:

Basic Tax (30%): ₹5 crore × 30% = ₹1.5 crore
Surcharge (37%): ₹1.5 crore × 37% = ₹55.5 lakh
Cess (4%): 4% of (₹1.5 crore + ₹55.5 lakh) = ₹8.2 lakh

That brings the total tax liability to approximately ₹2.14 crore, leaving Gukesh with a net amount of ₹2.86 crore.

In total, Gukesh’s combined winnings of ₹11.45 crore and ₹5 crore face a massive tax bill of nearly ₹6.23 crore, leaving him with roughly ₹10.22 crore after deductions.