How Prize Money and Stipends Are Actually Taxed in India

D Gukesh’s ₹11.45 crore chess world championship prize lost roughly ₹4.09 crore to tax. A separate ₹5 crore reward from the Tamil Nadu Chief Minister was taxed as well. Combined, his tax bill on the two came to nearly ₹6.23 crore, leaving him with about ₹10.22 crore of the ₹16.45 crore total. Neither prize qualified for the tax exemption many families assume applies automatically to any sporting reward, because neither came from the Indian government. Knowing this rule before the money arrives is the point of this article. (This article explains the general framework; it is not tax advice for a specific family’s situation, and a qualified chartered accountant should be consulted before filing.)

The exemption that actually exists, and its real limit

Section 10(17A) of the Income Tax Act exempts awards and rewards from tax, but only under a specific condition. The award must come from the Central Government, a State Government, a local authority or a body specifically approved by the Central Government for this purpose. The Central Board of Direct Taxes has clarified that rewards from the central or state government to Olympic, Commonwealth Games or Asian Games medallists qualify.

What does not qualify, and this is the part families most often get wrong: an award or prize from a private body, even a prestigious international federation, does not qualify, no matter how legitimate the achievement. Gukesh’s prize came from FIDE, the international chess federation, not the Indian government, so Section 10(17A) did not apply. The Tamil Nadu Chief Minister’s ₹5 crore award did come from a state government, but has been reported as not qualifying either. It is a reminder that even a government-source award needs to specifically meet the section’s conditions, rather than qualifying automatically by virtue of the source alone. Verify the exact conditions and any current updates at incometaxindia.gov.in before assuming any specific award is exempt.

What tax rate applies when it isn’t exempt

Prize money that does not qualify for the Section 10(17A) exemption is taxed as income from other sources, at a flat 30% rate with no deductions allowed for expenses incurred to earn it, before surcharge and cess are added. For Gukesh’s prize, the effective rate after surcharge and health and education cess came to approximately 39%. This flat rate applies regardless of the winner’s age or overall income level; there is no exemption threshold for a promising young athlete’s first significant prize.

TDS: the ₹10,000 threshold that matters immediately

Under Section 194B, whoever pays out prize money from a competition, contest or similar event must deduct tax at source at 30% the moment a single payout exceeds ₹10,000. This applies whether the prize is cash or in kind. For a prize in kind, the winner pays the TDS on the prize’s market value before receiving it. A Budget 2025 change confirmed this threshold applies per transaction, not as an aggregate across a year. A family should therefore expect TDS deduction on any individual prize crossing ₹10,000, not only once total winnings for the year cross that mark. Verify the current threshold and rate at incometaxindia.gov.in before assuming a specific payout’s tax treatment.

Scholarships and stipends: a less settled area

Section 10(16) exempts scholarships granted specifically to meet the cost of education from tax. A Khelo India scholar’s out-of-pocket allowance, reported at roughly ₹10,000 a month, sits in a less clearly settled position. It is not explicitly structured or publicly clarified by the tax department as either a Section 10(16) educational scholarship or as taxable income in the way a straightforward stipend would be. This platform did not find an official ruling on Khelo India’s allowance either way during this research. A family relying on this allowance as meaningful annual income should raise this question directly with a chartered accountant rather than assume either treatment.

Sponsorship income: GST is real, but rarely relevant at this scale

Sponsorship is classified under GST as a service, taxable at 18%. But two practical facts matter more to a family than that headline rate. First, GST registration itself is only required once a service provider’s turnover crosses ₹20 lakh a year (lower in a handful of special-category states). Most families receiving occasional local sponsorship for a teenager will not be anywhere near that threshold. Second, where GST does apply to a sponsorship payment, the reverse charge mechanism typically shifts the obligation to pay it onto the sponsoring company itself. This holds when that company is a body corporate or partnership firm. The obligation does not fall on the athlete or family receiving the sponsorship. In practice, for the local, business-to-family sponsorship this platform’s sponsorship one-pager article describes, GST is rarely the family’s direct problem. Income tax on the sponsorship amount itself, at the family’s normal applicable slab rate as income from other sources, is the more relevant question. It is worth confirming with a chartered accountant once a sponsorship becomes a meaningful, recurring amount.