Desk: The rules regarding online gaming in India have now completely changed. New online gaming rules coming into effect from May 1 will determine your tax and legal risk depending on which game you play. Where earlier people used to think about tax only after winning, now the category of the game has become the biggest factor. What started with a small entry fee can now lead to huge tax and legal troubles. Therefore it becomes very important to understand the new rules.
According to the new rules, online game is one which is played on mobile, laptop or any digital device through internet or electronic communication. This means that almost every digital game has come under this scope, be it fantasy sports, quiz apps or multiplayer battle games. The government has deliberately kept this definition broad so that no game can be left out of it. But the real difference comes when these games are divided into different categories. This category decides whether playing the game is legal or not and whether tax will be levied on it or not and if so, how it will be levied.
If you play any game by investing money and expect to win money or prize in return, then it will be considered as online money game. This includes not only cash but also coins, tokens or virtual currency. Under the new rules, such games are completely banned. Despite this, if a person earns from this, then 30 percent tax will be imposed on him directly and no loss set off will be available. If income is hidden and is detected later, there may be a penalty along with tax, which may be more than the income. That means this category has become more of a risk than entertainment.
E-sports is considered different from money games because winning in it completely depends on skill and not on luck or bets. These competitions are organized and do not involve betting or gambling. However, there is no relief in terms of tax here also. 30 percent tax and TDS will be applicable on earnings from internet-based e-sports tournaments. If the tournament takes place offline or over a closed network such as a LAN, normal income tax rules may apply. For professional gamers, sponsorship and streaming income will be considered business income.
Games in which neither money is invested nor any reward is expected, are called online social games. This includes quiz apps, puzzle games and casual games like e Ludo. Even if any subscription fee is given in these games, it is only for using the platform and not for earning. No income tax is levied on users in this category because there is no earning here. Therefore this will be considered the safest and risk-free option.
The biggest change in the new rules is that now the difference between skill and chance has ended. The real difference is whether you are playing with money or not. If you invest money, the game will directly come under the ambit of high taxes and legal scrutiny. Whereas games without money will remain completely safe. Therefore, next time before playing the game, think whether you are just playing or trying to earn money. This decision will decide both your tax and legal position.
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