The online gaming industry has evolved tremendously over the last decade. It has also become increasingly popular, thanks to the low cost of data and easy access to smartphones. Due to this, the gaming industry has invested in companies that offer handsome rewards and prizes. Online games like rummy, poker, and sporting games offer players real money as rewards. The fact that one can earn real money by just playing games online is a great incentive that lures many people to become devoted gamers.
However, while online gaming may seem like an easy option to earn quick money with minimum investments, it is not as picture-perfect as it appears.
How are the winnings taxed?
Under Section 115BB of the Income Tax Act, which is a provision for income that is earned through online games and is under the category of ‘Income From Other Sources' while filing IT returns, all winnings from card games, betting and gambling are taxed at a rate of 30 per cent excluding cess.
There is a TDS applicable on prize money that exceeds Rs 10,000. The tax needs to be deducted at the source itself by the gaming platform that is paying the winner. All gamers in India will have to disclose their winnings on which TDS has been cut while filing their IT return.
The gaming platforms that offer huge sums of money as prizes and rewards often take important documentation and personal details from the gamer. A gamer is asked to provide their PAN card along with bank account information for transactions.
When it comes to playing games online, prizes received are hardly ever awarded in kind. However, when games are played on television shows, prizes are awarded in kind. And in that case, the tax applicable on the reward will be based on the market value of the winnings.