Income tax rules on winnings from online gaming

1. Income tax rules on winnings from online gaming Online gaming has opened up new avenues for Indians to earn real money by playing games. Games such as poker, rummy, sporting games like cricket & football, quizzes, battleground games, etc. offer players the chance to win real money. This has become an added perk for the new generation of Indian gamers. So, the big question that arises is how are winnings from online gaming taxed in India? For the uninitiated, the provisions of income earned from online gaming fall under section 115BB of the Income Tax Act. This comes under the head ‘Income from Other Sources’ while filing income tax returns. It comprises winnings from betting, gambling, card games or any other games. Thus, winnings from online gaming also come under this category. Winnings from online gaming are taxed at a flat rate of 30%, excluding cess. The net rate after cess comes to 31.2%, without the benefit of the basic exemption limit. It is important to know that the person paying out the prize money is required to deduct tax at source before distributing the winnings. This is a TDS provision laid down under section 194B & is applicable only if the winnings cross ₹10,000. No deduction or expenditure can be claimed against such income. Gamers need to be aware that any winnings on which TDS has been deducted will also be required to be disclosed in their income tax returns. The gaming companies take the gamer’s PAN along with the bank account details, nonetheless, the gamer’s responsibility does not get over once they provide these details. The reporting of such income earned will be necessary to be done at the time of filing of the gamer’s tax returns. If the winnings are received in kind, which is uncommon in the mobile gaming space, then the tax rate will be applicable on the market value of the prize received in kind. The prize distributor will be required to deduct the tax before transferring the prize to the winner, or the same can be borne by the prize distributor himself. The Indian online gaming industry is rapidly growing with around 300 million users as of now. This number is foreseen to rise 2x by 2022, with some gaming companies already witnessing a 100% surge in new user registrations since the beginning of the nationwide lockdown. Online gaming is foreseen to become a major source of revenue for the Indian government if even a tiny percentage of this number of results gets converted into winnings. For more details: https://www.gaming360.in/income-tax-rules-on- winnings-from-online-gaming/