Do you have earning from gaming? – Pay tax By Archita Nathani

Do you have earning from gaming? - pay tax By Archita Nathani

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Do you have earning from gaming? – Pay tax By Archita Nathani

Online gaming has gained immense popularity since last decade especially since lockdown. It has also become increasingly popular because of low cost of data and easy access to smartphones. During lockdown people were quite free and many people lost their source of income, and thus people saw online gaming an opportunity to earn money and entertain themselves.  .Online games like rummy, poker, and sporting games offer players real money as rewards. Earning real money by just playing games online is a great incentive that enticed many people to become staunch gamers.
 Many people started organizing online games, they charged a certain some of money as entrance and gave rewards to the winners, by this both the organizer and players earned income.
However earning money through gaming that too with minimum investment might seem to be a cakewalk but it isn’t as impeccable as it seems.
Taxability of income from online gaming
Section 115BB of the Income Tax Act, provision related to taxability of income from other sources covers the income from gaming. Winning, betting, gambling, card games or other such income are also covered under this section. As per this section winnings from online games are taxed at a fixed rate of 30 percent, apart from the cess. Also the benefit of basic exemption limit can’t be used against this income. Hence the income is taxable at rate of 31.2% including cess.
Not only one has to pay high tax on such income, such income attracts TDS under section 194B, which specifies that 30 per cent tax is deducted on any prize money if it is above 10,000. This is deducted at source (TDS). A 4 per cent education cess is payable on the tax amount.
And while filing return include the winning income in “Income from Other Source” head.
What about the losses and expenditure done related to gaming income?
The income earned through winning betting gaming or other such activity are fully taxable , there are no deductions or exemption available against such income. So you’re bad, if you have lost or incurred expenses, you have to bear it.
Liabilities on part of distributor of prize money
If you are distributer of prize money then make sure you comply with following points:-
  • As per section 194B you as a distributor of prize, have to deduct TDS @30 % if the prize value is above 10000 at the time of payment.
  • If the price money is wholly in cash then the TDS amount should be adjusted with the cash and net amount should be paid.
  • In a case where the winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the winnings. It will either recover the tax amount from the winner or will bear the tax liability himself and pay the TDS.
  • Make sure that you collect the gamer’s PAN and bank account information.
  • Issue TDS certificate to the winner.
Controlling of taxation on online game
The Supreme Court and the legislature have agreed on the taxability of the income derived from online gaming platforms for both corporations and players. Still, some concerns need to be addressed by the legislature and the tax department.
If a player does not pay his or her tax, in that case, he or she may be subjected to a tax investigation sometimes known as an ‘audit. It is preferable to hire a Certified Public Accountant or a lawyer, having expertise in gaming taxation. Many organizations already employ accountants to help their players with tax difficulties.
So as a professional gamer, while negotiating the terms of your next contract, you should consult a tax advisor to guide you about the compensations you can receive

 

{ Ku. Archita Nathani is in CA (Final) & undergoing her article-ship  at SSRPN & CO. She can be reached at taxtalknew@gmail.com }

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