The Indian Premier League (IPL) is not just a cricket tournament but a global phenomenon that generates billions in revenue in every edition. From player auctions to broadcasting deals, sponsorships, tickets, and streaming rights, the IPL is a money-making machine.
But amidst all this financial activity, a question arises: How much tax does the Board of Control for Cricket in India (BCCI) pay for Indian Premier League operations? Surprisingly, the IPL enjoys significant tax exemptions. Here’s why.
Tax Exemption for IPL Operations
Contrary to what one might expect, the IPL as an entity does not pay taxes for its revenue. This was reinforced by a 2021 ruling by the Income Tax Appellate Tribunal (ITAT). In an appeal filed by the BCCI, the tribunal upheld that even though IPL generates substantial income, its primary objective of promoting cricket remains intact.
The ITAT’s decision, issued on November 2, 2021, clarified that as long as the profits generated through IPL are used for the BCCI’s mission to promote cricket, the league is entitled to tax exemptions under Section 12A of the Income Tax Act. This provision allows tax benefits to entities established for charitable purposes, including sports promotion.
Why Does IPL Qualify for Tax Exemption?
The controversy surrounding IPL’s tax status is not new. In the financial year 2016-17, the BCCI faced scrutiny from the revenue department through three show-cause notices. The department questioned why the tax exemption under Section 12A should not be revoked for revenue generated through IPL.
The BCCI approached the ITAT’s Mumbai bench, arguing that the Indian Premier League, despite its commercial structure, contributes to the overall growth and popularization of cricket in India. The tribunal, led by judicial member Ravish Sood and vice president Pramod Kumar, dismissed the revenue department’s contentions. The bench ruled that the commercial aspects of IPL do not negate its fundamental purpose of promoting cricket.
The tribunal observed, “Merely because a sports tournament is structured in such a manner so as to make it more popular, resulting in more paying sponsorships and greater mobilization of resources, the basic character of the activity of popularizing cricket is not lost.”
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Taxation for IPL Players
While the IPL body itself enjoys tax exemptions, the players participating in the league are not as exempted from the norms. The income earned by cricketers through Indian Premier League contracts, sponsorship deals, and advertisements is taxable under Indian tax laws.
Indian players are taxed according to their income slabs under the Income Tax Act, while foreign players pay taxes on their Indian earnings under the provisions of double taxation avoidance agreements.
What This Means for IPL’s Future
The ITAT ruling underscores the unique status of the IPL as a commercially lucrative yet tax-exempt entity due to its association with BCCI’s larger objective of cricket promotion. This exemption provides BCCI with a significant financial cushion to reinvest Indian Premier League profits into developing cricketing infrastructure, grassroots programs, and talent nurturing in India.
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