Income tax

Income tax department rules for real money earning from Online games, Here is an overview of the current rules and regulations.

Real Money earnings are the best perks from several Online Esports games. There are tournaments organized by the prestigious organizations and gaming publishers, and the winners in all the events and tournaments earn a whopping amount. Several blockbuster titles, including Fortnite, VALORANT, CS: GO, PUBG, and many others, are the voguish ones among the prodigy gamers in India and beyond. 

Not only the battle royale games, but several casual games, arcade ones, real sports-based games, and gambling games are also there for ensuring real money earnings after winning the championships.

Indo-China tensions

Recently, with the growing Indo-China tensions resulting in the ban of one of the most successful games across India and abroad, PUBG, left several of the gamers and other involved entities disheartened and disappointed. However, multiple titles emerged, making the most out of the vacancy and seeking the opportunity to be the next best and preferred titles. 

Thanks to the availability of the internet and several mobile devices, accessing the top online games and the tournaments are just a few taps! Also, with the emergence of investments in online games, the gaming industry is thriving immensely.

Well, these games might offer a vast earning with a rich amount and offers!

But, how are they taxed across India?

The Indian government and the constitution have a separate section for the taxation of income earned through online gaming. The section is 115B of the Income Tax Act. While filing the income tax returns, the section categorizes under ‘Income from Other Sources.’ This earning includes the ones through any online game, including card games, Battle Royale, gambling, and every other one assuring prize money.

Besides, there is a 30% flat rate on winning taxes, excluding the cess. However, with the addition of cess, the rate is 31.2%, which excludes any further benefits of the general exemption limit. Also, according to the TDS provision of section 194B, if the winning amounts exceed 10,000 INR, then before the distribution source must deduct the tax before the prize money’s distribution. Additionally, the winning parties have no claims over the deducted amount.

For the avoidance of any further discrepancies, the gaming companies take the PAN of the gamers and the bank details. But the responsibility of the gamers is far beyond this, and the gamers must know that even after the deduction of TDS, they must necessarily disclose the winning in the income tax returns.

If the winning is not in real money and is in some other category type, the tax rates are still applicable. In such cases, the tax amount applies to the market value of the received prize. In these cases, the prize distributor must deduct the tax before giving off the prizes.

Growth Factors

With the surge in the online gaming industry’s market value and user base, it has already acquired around 300 million users in India. Growth has also enormously risen with the emergence of the COVID-19 and lockdown period. And there are more expectations from the near future, and this number might get doubled in a couple of years. With the growth factor, the real money winning might rise too, and that all would eventually give rise to the government’s revenue generation with the provision of tax deductions.

By Tanya Mishra

A Writer 'All Ghillied Up' as a Gamer.

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