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Understand the mathematics of tax on online gaming and lottery

by BankingTricks Desk

We occasionally receive instant cash through online gaming platforms, quiz shows, lotteries, and other such events. Have you ever pondered what happens if you win on one of these game shows, though? Prior to the money entering your account, you need to be aware of the amount of money spent on such winnings. We shall learn about the tax deductions on such gains in this post.

TDS on profits

All gains over Rs. 10,000 would be subject to 30 percent TDS under section 194B of the Income Tax Act. The actual rate will be 31.2 percent with Cess and Surcharge. The business or group disbursing the reward money shall subtract this TDS.

Income from the following sources will be subject to flat TDS of 31.2%

  • Game show or any such show on electronic media
  • Online gaming
  • Lotteries (both online and offline)
  • Gambling (both online and offline)
  • Race betting
  • Quiz

No Tax Refund on TDS

Taxpayers are often eligible for a tax refund if the TDS component exceeds their tax liability for a specific financial year. However, the taxpayer cannot request a return of this TDS amount in the case of such winnings.

No deduction for winnings

Also read: Your profit is Yours! Here’s How you can Save Capital Gain Tax

In general, a taxpayer can use section 80D or 80C deductions to lower their taxable income and tax obligations. Such deductions, however, cannot be made in order to lower the wins. Regardless of the deduction you are qualified for, a 31.2 percent TDS is imposed.

Income from Work

 The tax bracket you fall under will determine your income tax obligations; a 31.2 percent non-refundable TDS is applied to all lottery and game show wins. All profits will therefore be subject to a flat 31.2 percent TDS regardless of whether you fall under the lower “Nil” tax rate or the higher “30 percent” tax slab based on your taxable income.

Non-cash gifts

Before taking ownership of presents like cars or apartments, the recipient must pay a TDS of 31.2 percent. For instance, you would be required to pay TDS of 31.2 percent. In some circumstances, the corporation giving out such gifts may decide to take on the TDS liability.

Treated as other Income

Income from these game shows is counted separately from other income for tax purposes. As a result, the tax obligation on the remaining income is determined separately according to the income tax rates, deductions, and taxable income. For example, Suppose, Suhani won Rs. 10,00,000 from a quiz show, and her income from her salary after all deductions is Rs. 20,00,000. Her tax outgo that year will be in two parts. The first is TDS on winnings under section 194B of Rs 3,12,000 (10,00,000 X 31.2%). Second would be her tax liability on his taxable income of Rs 20,00,000 as per her income tax slab.

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