Online games with players connected through the internet are becoming popular. Apart from spending time for enjoyment, such games also need some skills to win.
While many youngsters enjoy spending time on playing online, some of them get addicted to it and remain hooked online for a long duration, which often harms their studies and other work.
Things may take a worse turn, when online games are played for money, which may even ruin the lives of youngsters already addicted to gaming online.
Even though online gaming needs considerable skill for winning, the laws don’t put it at par with the field games, resulting in gambling status for the online gaming played for money.
So, online gamings involving money are treated like lottery, horse race, sports betting, games of chance etc.
Accordingly, the winnings from online gaming are taxed at the highest tax bracket without any of the benefits of any deductions and exemption limit.
“In case of winning from websites etc if the prize money exceeds Rs 10,000, then the winner will receive the prize money after the deduction of TDS @31.2 per cent (30 per cent tax plus applicable cess) u/s 194B,” said Archit Gupta, Founder & CEO, Clear.
Gupta lists the following tax rules applicable on winning from gambling:
- The tax will be imposed on the entire winning money and no expenditure incurred in playing games online is allowed as deduction from gambling income.
- No deduction under section 80C or 80D or any other deduction/allowance is allowed from gambling income.
- The Benefit of basic exemption limit and income tax slab rate is also not applicable to this income. The entire amount received will be taxable at the flat rate of 31.20 per cent. So, even if a person doesn’t have any other income, tax will still be deducted from gambling income.
- Onus of accurately reporting gambling income is on the taxpayer.