Online gaming tax status in 2020
Over the past few years, there have been several discussions about the regulation of gambling laws in India. While some people support a complete ban on the activity, others advocate strict rules in place for the safety of online gamers. Sadly, there has not been a clear decision on this from the government and India continues to follow old laws put in place in the mid-1800s by the British government. Nevertheless, despite the vagueness of general laws, there are essential regulations to regulate the rewards obtained by players through gaming platforms.
While there are no specific benefits associated with income from online gambling, there are, however, mandatory taxes on various rewards. Let’s take a look at what these tax laws have to offer gambling enthusiasts.
What are online casinos?
In the current era, several countries have imposed a ban on physical or physical casinos. People have to travel to different geographic locations to enjoy a spin or two of their favorite games of chance.
Fortunately, with the widespread use of the internet, casino companies have started operating online through custom casino websites. These websites provide an exciting environment to play. They offer a variety of online gambling games from best game developers across the world such as Microgaming, NetEnt, Play N’Go, Evolution Gaming, etc. They also have an affiliate gaming license which makes them legal in different countries or states. The most popular licensing authorities are the UK Gambling Commission, Curacao Gambling Authority, Malta Gaming Council, etc. The main function of these licensing bodies is to ensure that the gaming platform meets all safety guidelines and reliable conditions for players.
Apart from that, these platforms offer players the chance to earn real cash and in-kind rewards. Transactions on licensed gaming platforms are transparent and secure. They also offer various bonuses to keep players engaged and loyal.
Taxation of cash rewards
Surveys conducted in 2020 revealed that there are approximately 300 million online gamers in India. During containment, that number has already been 100%. It is only reasonable to assume that the current number will increase rapidly in the years to come. As online gambling becomes a popular choice among gamers, the cash rewards earned through such means have also increased aggressively. This calls for an appropriate measure to regulate player income. Fortunately, this provision was already introduced in 1995 in the Income Tax Act of India, allowing the taxation of income from unannounced sources.
According to section 115BB of the Income Tax Act, all profits from online games are taxable. The section called “Income from other sources” requires that tax be declared on profits made from online gambling, lottery, sports betting, online gaming, etc. The tax levied on this income is 30% excluding tax. The net amount is 31.2%, including the cess. This tax does not take into account the amount won or games played. This means that no matter how much you earn, you have to pay 30% tax.
Apart from this, if a player wins an amount greater than Rs. 10,000, he is subject to the TDS which must be deducted by the gaming platform. This law falls under the Widely discussed article 194B.
Taxation of in-kind rewards
Several online casinos offer in-kind rewards such as gift baskets, paid vacation, plane tickets, etc. These are often promotional or rewarded to loyal or VIP players. If you receive such a reward, you must disclose its market rate. These awards will also be submitted to TDS.
When filing income tax for your winnings through online gambling, it is mandatory to disclose the amount won and the TDS deducted exclusively. This should be followed after providing your PAN, bank details and address to the online gaming platform.
According to Income Tax Act, Section 115BB, and Section 194B, there is absolutely no benefit, expense or exemption for online gambling revenue.
In conclusion, although the income of online casinos is taxable, no benefits are provided by the government at this time. However, in view of the popularity of online casinos, we could see positive changes in the paradigm and benefit from a new set of regulations for online gambling.