Disclaimer: These are my own perceptions after actual visit to one of the royal floating “Casinos” on the picturesque Mandovi River in Panaji, Goa.

So, let me start, take a ride to Goa with a bunch of friends, shell some 1500 bucks for an entry to Casino, you will be escorted in a small boat to a giant Casino Ship, which is a different world altogether.

Assuming, I have around INR 1,00,000 of illegally obtained (tainted) money. I am carrying hard cash, what do I do, just before entering the casino, distribute the same to 3 friends equally. So now I have INR 25,000 amongst 4 people and collect coins. Go play….!!!!!

If you win enough and double the money, assuming some permutation combination fetched 2,00,000 from the 25,000 with 4 people, now just encash the coins. Collect the entire 2,00,000 and walk away home.

What next??

Relax, you can safely deposit all the money to your bank account.

Factual findings

  1. Entry to casino is unrestricted, no screening as such. Names will just be asked for entry, no ID documents asked for. A small band like thing would be tied to your hands.
  2. Small denomination of coins would be given with the entry fee paid inducing you to play.
  3. There is no limit on how much coins can be purchased by paying cash, for high end customers, who pre-book and have a package deal of accommodation as well, there is an option to wire transfer the funds to the casino account (Oh wow…!!!)
  4. Interestingly, just to keep you motivated while playing (Poker, Roulette being the most popular) there are ATM’s of Indian banks just beside the “Chips” counter inside the floating casino (All these days I thought ATMs were only on land) and you can withdraw cash anytime.
  5. The winnings are subjected to TDS (Tax Deducted at Source) under section 194 B of Indian Income Tax Act, 1961 , its similar to withholding tax as a deduction from your total payments, in India the TDS rate is 30% on lottery winnings, games of chances (covers casinos).

However in no case, I could see any TDS deducted from any payments made to customers.

Huh, this was my story. Lets analyse the above as pure professionals.

Casino Industry India

Only three states in India allow casinos, Goa , Daman and Sikkim. Goa has the highest number of casinos, besides like the one I mentioned floating casinos, in-house casinos at five star hotels. The footfalls (number of people visiting) is highest in Goa, understandably as its a tourist destination.

Let us focus only on Goa.
The act governing the regulations of casinos is, “Goa, Daman and Diu Public Gaming Act”. According to the Goa, Daman and Diu Public Gambling Act, 1976 casinos can be set up only at five star hotels or offshore vessels with the prior permission of the government.

Internationally, casinos are considered as a vehicle for money laundering and terrorist financing. FATF has infact released Casino Typologies report

India’s commitment to Money Laundering has entailed that, Casinos are covered as a reporting entity-RE, responsible for maintaining client records, carry due diligence and furnish information. Accordingly, Casinos are required to furnish information from April, 2009 onwards. Casinos have also been notified to be covered under FIU IND even by the state legislation and will have to report under will have to be followed by all registered casinos under the Goa, Daman and Diu Public Gambling Act, 1976.

Obligations for Casinos under FIU IND:

  1. To verify the identity of its clients, maintain certain records and furnish certain information to the director, FIU-IND.
  2. Registered Casinos should ensure that all customers and transaction records and information are available on a timely basis to the competent investigating authorities.
  3. Appointment of Principal Officer, the person designated to oversee the compliance under this act.
  4. Furnishing of information: CASH TRANSACTION REPORT (CTR)
    1. All cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency
    2. All series of cash transactions integrally connected to each other which have been valued below rupees ten lakhs or its equivalent in foreign currency.

Some issues:

  1. Whether winnings from Casinos is illegal?
    Firstly the winning is not illegal as gambling is a state subject and gambling in Goa is governed by “Goa, Daman and Diu Public Gaming Act”.
  2. Will the winnings be taxed under Indian Laws?
    Yes, You will have to file your income tax return for the year ending March 31, 2015 for which the due date is July 31, 2015, as you would fall under the category “Individual”.The tax on the income earned through gambling is thirty percent along with a surcharge of ten per cent on the above tax.
    No deductions and exemption are available against such income .
  3. Can I carry my lottery winnings outside India?
    Strictly PROHIBITED under FEMA (Foreign Exchange Management Act)

WRAP UP

Like in my case, the winnings out of my illegal money, if I pay tax on the same, effectively I am converting my entire money into legitimate money.

The pertinent issue is Casinos are not bad, you just have to ensure they aren’t misused by bad people.

Understanding the facts and legislation, the state of Casino fulfilling their obligations in India is very poor. The State Govt of Goa and FIU IND have to monitor this sector actively.

Although I have no concrete evidence from what my sources tell me, background of customers and filing of Cash Transaction Reports (CTR) is almost non existent in Casinos. Its a matter of political will, sadly though most of the Casinos and major customers of casinos are PEP’s.

Just hope the casinos are regulated better and the menace of money laundering can be stopped through this sector.