Indian gamers have been on the rise and monetising their passion for sometime now. Those who make income from online gaming are required to file Income Tax Returns (ITR) for tax compliance. Online gaming income, including fantasy sports, e-sports, and poker, is taxable and has to be declared under the head “Income from Other Sources” in the ITR. The income is liable to be taxed at a flat rate of 30%, with no exemption limit, deductions, or rebates, under Section 115BBJ of the Income Tax Act.
Tax Deduction at Source (TDS) on Game Winnings
Online gaming sites deduct tax at source (TDS) at 30% of net winnings, the sum won minus the entry fee or stake deposited. The TDS is deposited with the government, and players get the balance amount. The TDS deducted is shown in Form 26AS, which is to be checked by taxpayers and attached with ITR filing.
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Filing Requirements and Process
The income tax authority requires filing ITR if aggregate TDS deductions are more than ₹25,000 in a year, as per Rule 12BA of the Income Tax Rules, 1962. Filing an ITR is required even if the aggregate income from gaming falls short of the basic exemption limit, as long as gaming income has TDS involved. This brings about transparency and compliance with tax regulations.
Gamers need to file the correct ITR form:
- ITR-2 for salary earners reporting gaming winnings,
- ITR-3 for business or profession income including that from games as a profession or business.
Gaming income cannot be reduced by losses arising out of other incomes, and losses in games cannot be carried forward or adjusted with future incomes.
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ITR: Professional Gamers and Streamers
For professional gamers or streamers who earn from gaming, taxation might be for business or profession income, under which presumptive taxation under Section 44ADA can be used, and such professionals would submit ITR-3 or ITR-4. They can also avail deductions for genuine expenses incurred on gaming hardware, internet charges, subscriptions, and advertisement expenses to offset taxable income.
ITR: Penalties and Compliance
Failure to report gaming revenue in ITR may invite notices from the Income Tax Department and even penalties. Even minor winnings of as little as ₹10 are subject to tax and must be reported to keep away from future legal entanglements. Reporting ITR in the right manner with necessary disclosures keeps away from hassles of tax.
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ITR filing for gaming winnings includes reporting all winnings under “Income from Other Sources,” checking TDS credits, selecting the proper ITR form, and record-keeping for income and expenses. Gamers are recommended to take the help of tax practitioners or CAs for proper filing and compliance. This way, gamers stay in compliance with Indian tax legislation, performing their fiscal duties responsibly along with pursuing their gaming activities.
