Online games, which include first-person games, strategy games, multiplayer role-playing games and so on are widely available on digital gaming systems such as PCs, consoles, and smartphones. Evergreen TV shows such as quiz, dance, games, singing competitions, fantasy sports or any other activities provide winners with enticing prize money. And considering the fruitful winning you must be aware of the tax implications of such winnings which we are going to discuss here.
Income earned from online games is taxed under section 115BB of the Income Tax Act. While submitting income tax returns, this is classified as "Income from Other Sources." Winnings from lotteries, crossword puzzles, races, card games, betting, gambling, and other games are also included. As a result, winnings from online games are included in this section. First and foremost, let me state unequivocally that Section 115 BB and 194B all refer to the taxation of income from any game. Sec. 115 BB is a clause that explains the relevant rate of tax, while Sec. 194 B explains TDS rules and when a taxpayer is required to deduct TDS. Section 194B of the Income Tax Act mandates that any winnings above Rs 10,000 be subjected to a 30% TDS.
The effective rate will be 31.2 percent after cess and surcharge. The corporation or organisation that transfers the award money is supposed to subtract this TDS. Players must be aware that any winnings from which TDS are withheld must still be recorded on their tax returns. The gaming firms hoard the gamer's PAN as well as bank account details; though, the gamer's role does not stop here. Disclosure of such income will be required when the gamer's tax returns are filed. Gamers who have submitted their PAN card will also get a TDS certificate. The fantasy sports companies' tax deduction at source will be recorded in Form-26AS. In most cases, taxpayers are entitled to a tax refund if the TDS portion exceeds their taxable income for a given fiscal year. Moreover, taxpayers cannot claim a refund against this TDS amount in the event of such winnings.
Regardless of the deductions you are entitled for, you will be charged a TDS of 30%. The receiver must pay a TDS of 31.2 percent on gifts earned in the form of an award or winning prize before taking ownership of such a present. For example, if you win a car worth Rs 3,00,000 in a lucky draw, you'll have to pay a TDS of 31.2 percent, or Rs 93,600, on the car. If the winning participant is given money in the form of a cheque, cash, DD (demand draft), or online transfer, for example, the payment will be made after tax has been deducted at the applicable rate.