Gukesh Dommaraju’s ₹21 Crore Net Worth: 42% Tax Bite Awaits World Chess Champion’s Prize Money

After clinching the 2024 FIDE World Championship title in Singapore on December 12 by defeating China's Ding Liren, India's new chess prodigy, Gukesh Dommaraju, returned home on Monday. At just 18 years of age, this victory not only brings him global recognition but also a substantial financial windfall. Reports indicate that D Gukesh's net worth has surged to nearly ₹21 crore following his triumph at the World Chess Championship.

Gukesh earned $600,000 (approximately ₹5.07 crore) in prize money from three winning games during the championship. Including shared prize money, his total tournament earnings reached $1.35 million (approximately ₹11.45 crore).

However, as per Section 194B, Rule 26 of the Income Tax Act, the Indian chess prodigy is expected to pay between 39% and 42% of his prize money in taxes.

Before securing the title, Gukesh's 2024 net worth was estimated at ₹8.26 crore ($1.5 million), largely accumulated through high-stakes chess tournaments and endorsement deals.

The victory in Singapore was a significant milestone for Gukesh, as it made him one of the youngest grandmasters to ever win the championship. However, with great reward comes the responsibility of paying taxes.

According to India's tax laws, specifically Section 194B, Rule 26 of the Income Tax Act, Gukesh could be taxed at a rate ranging from 39% to 42% on his prize money. This provision requires the deduction of tax at source (TDS) on winnings from contests such as lotteries and games, including chess. Amit Baid, Head of Tax at BTG Advaya, suggests that under the new tax regime, which is now the standard for individuals, Gukesh might see a slightly reduced tax rate of 39%, amounting to an approximate deduction of ₹4.5 crore from his earnings.

Breaking down Gukesh's earnings, FIDE allocates $200,000 (about ₹1.68 crore) for each game won by a player in the championship. With three victories under his belt, Gukesh's winnings from these matches total to $600,000, or approximately ₹5.04 crore. Additionally, Mint reports that the remaining $1.5 million from the prize pot was evenly split between Gukesh and Ding Liren, estimating Gukesh's total earnings to be around ₹11.34 crore. These figures highlight the considerable financial gains associated with such a prestigious title, albeit before the substantial tax deductions come into play.

Recognition and Rewards Back Home

In recognition of his remarkable achievement on the international stage, Tamil Nadu Chief Minister MK Stalin announced a reward of ₹5 crore for Gukesh. Nevertheless, this reward, much like his prize money, could also be subject to taxes. Under the prevailing tax laws, only awards explicitly approved by the Central Government for public interest can be exempt from taxes, as per Section 10(17A) of the Income Tax Act. This caveat introduces uncertainty regarding the taxability of the state reward, with professionals like Amit Baid noting potential legal ambiguities for athletes in similar situations. The Madras High Court has provided some guidance in this area, suggesting that approval for tax exemption could be either explicit or implied, yet this leaves room for interpretation and possibly, legal challenges.

Despite the tax implications, Gukesh's victory is a monumental moment for Indian chess, shining a spotlight on the young talent emerging from the country. His win against a seasoned competitor like Ding Liren not only showcases his exceptional skill and dedication to the game but also sets a high bar for future competitors. As Gukesh navigates the financial aspects of his achievement, his focus will likely remain on furthering his career in chess, building on this significant success.