Online gaming is becoming a major trend nowadays. People have such easy access to the Internet and smartphones that online gaming is on a roll everywhere. Many companies also tend to invest in the gaming industry and offer people huge amounts of prizes and rewards. Games like Rummy, Poker, and other sports games give away real prizes and money to passionate gamblers in casinos that have a free spins bonus. This winning of real money and awards entice the people to invest their time into these games and fulfil their wishes.
This way, these people become devoted gamers and invest all their energy into online gaming. Online gaming has become an easy source of earning money with more or less hard work. People do not need to make major investments into it and get higher returns. But, this gaming system is not as easy as it looks to be; there are many pros and cons attached to it.
The Supreme Court of India has made Rummy and other online gambling sources legal in India, but they are subject to a few taxes and charges. But the rise in online gambling has been a boon to many companies. While some people see this as a thrilling and entertaining source, few companies see this as a major source of their earnings.
Let us learn more about online gambling taxes and how they may affect players. We promise; this article will come to your rescue for all the right reasons. So, stay tuned and learn more. Start now!
How Is The Winning Amount Taxed?
There is a provision in the income tax system for online gamers. Under section 115BB of the Income Tax Act, all the money earned through online gaming, cards, betting and gambling, are taxed at 30 percent, excluding a cess of 31.2%. Such types of incomes are categorized under ‘Income from other sources. TDS [tax deducted at source] charge is applicable on any money prize exceeding 10,000. This charge is deducted by the gaming platform itself, who shall pay the winner.
TDS is a source of collecting taxes on incomes, dividends or assets. The payer deducts this tax prior to paying the remaining balance to the payee according to the Income Tax Act 1961. The tax rates that are deducted are decided under the provisions of the Act or the First Schedule to the Finance Act. In the case of a non-resident person, Double Taxation Avoidance Agreements shall prevail.
Rules On Online Gambling Tax
As mentioned earlier about the tax system for online gamers, the tax rules are applicable for both land-based and real money casinos. The rules about levying taxes from online gambling are still vague. The Public Gaming Act of 1867 is outdated, but it tends to set up a concrete base for levying taxes from online gambling. There are a few legislative acts that also set up a foundation for online gambling taxation.
GST Terms For Online Gambling
GST [goods and services tax] was adopted by India in the year 2017, which is a prevalent standardized tax collection method. It is a multi-stage tax that includes VAT, service tax, excise tax etc. It has helped eradicate the other unnecessary taxes from our country.
According to ENV Media, India’s goods and services tax is equal to the value-added tax [VAT]. It charges a 28% tax rate on all entertainment services, including casinos, racecourses and all the other facilities provided by them. Online gamers need not be worried about this online gambling tax because it is an indirect tax already levied during the purchase of the final product. It surely does affect the return amount as on the statistical grounds, the investment made by the person and return expected down. The winning prize decreases.
Direct Surcharges For Online Gambling
A surcharge is a checkout fee or an extra fee charged on the cost of goods and services apart from its initial quoted price. It is levied when a payment is received by cheque, credit card or debit card. It covers up the charge incurred by the receiver while accepting the payment—for example, merchant service fees by a credit card company.
As there are divisions in the income groups, along with a tax rate of 30%, some surcharges are also applicable to online gambling. 4% of the health and education cess surcharge is also levied, which is not dependent on any income. Apart from these, if a person wins an amount exceeding INR 50 lakh, a surcharge of 10% to the prevailing tax rate shall be applicable, which goes up to 33%. Similarly, if a gamer wins a lottery of more than one crore, the person shall pay a surcharge of 15% to the overall tax rate, which eventually goes up to 34.5%.
What Type of Games are Taxed?
There are multiple online gaming zones and real money casinos that lure people into playing these games and offer them huge sums of money in return. In such games, there is a minimal investment with high returns. The income tax department charges a direct tax of 30% from the winning amount. Out of which a cess charge of 31.2% is excluded.
Some sources under which these taxes shall be levied are as follows:
- Online card games
- Games show on TV and online
- Crossword puzzles
- Horse races
Under the sources mentioned above, the income tax department can levy direct and surcharges. It’s depending on the winning prize from the person who shall receive it. The winner also incurs TDS, but it already stands deducted by the people who are paying the winning prize to the gamer.
The Bottom Line
As we can see in today’s generation, online gambling is becoming a fast time leisure for people and a source of earning money. The government applies online gambling tax to the winning amount based on the market value. The income earned by the winner. Online gaming zones, land-based venues. Some casinos are also bound to pay the normal rate taxes to the government. Since these kinds of Income are now legal in our country, prevalent tax. Also, surcharges are also applicable depending on the winning amount.
Online gambling benefits people in multiple ways. It is profitable from an economic point of view, has easy payouts, is fast and anonymous and has wide choices of game selection. Hence, online gambling can be resourceful if played wisely and can be beneficial if it is clean in the Income Tax Return books of the winner. Success in these games is by pure chance.