Income Tax News: Earnings from lottery prizes, online gaming, and television shows are taxed, with the tax implications varied depending on the nature of the income and the applicable tax regulations in each jurisdiction. Below is a breakdown of the tax treatment for each:
The Allure of High-Stakes Game Shows and Fantasy Sports
The opportunity to earn a lot of money has repeatedly drawn enormous crowds to game shows and fantasy sports in India. KBC started this practice by offering competitors huge monetary rewards, which piqued the public’s interest right away.
Following KBC’s success, several television networks launched similar high-stakes series, including Big Boss, MTV Roadies, and Dance India Dance. Furthermore, the current boom in internet access has boosted the appeal of online gaming platforms like Rummy, Poker, and Dream 11, all of which offer substantial payouts.
Tax Implications for Game Show and Online Gaming Winners
However, contestants in shows such as KBC and Dream11 should be aware that their wins are taxed. According to ClearTax’s tax expert, Manikandan S, “The Income Tax Act classifies game show and online game winnings as income, taxable at a rate of 30% under Section 115BB. This includes the actual winnings plus any bonuses or incentives. The tax is deducted at source under Section 194BA before the net winnings are paid out.”
Tax rules for game show income
- Section 194B of the Income Tax Act imposes a 31.2% TDS on prize money exceeding Rs 10,000.
- TDS is levied on horse race winnings that exceed Rs 10,000.
- Expenses and allowances cannot be deducted from such income.
- Income tax deductions under sections 80C and 80D are not allowed against winnings.
- The basic exemption limit and slab rates are not applicable; wins are taxed at a flat rate of 31.20%.
Understanding Income Tax Form Categories
When it comes to reporting these winnings, “Income from Other Sources” is the designated category on income tax forms. “Proper documentation and records, including the TDS certificate, are crucial,” adds Manikandan. He also points out that winnings must be declared in ITR-1 for incomes up to Rs 50 lakh, and in ITR-2 for higher earnings.
Lottery Winnings
Lottery wins are treated as taxable income in most countries, including India. In India, lottery winnings are taxed at a flat rate of 31.20%. This means that if you win a prize in a lottery or game show, the entire money will be taxed at the applicable rate.
Global Taxation of Online Gaming Income
Many jurisdictions tax online gaming income, such as profits from gambling websites or professional esports competitions. The tax treatment may differ depending on whether the income is deemed capital gains or ordinary income.
During the IPL 2023, Fantasy Sports (FS) had a huge growth in user base, with Redseer Consultants claiming 61 million active users, up 11% from the previous year. The addition of new users was especially noticeable, growing by 35%. This expansion had a significant economic impact, with gaming income increasing by 24% to Rs 2,800 crore, according to Business Standard.
