Tax secrets E-sports players in India need to know
What's the story
E-sports has exploded from a nerdy pastime to a goldmine career, with thousands of athletes across India raking in the rupees.
But with big bucks comes the headache of managing your money, and taxes can be especially tricky.
This article will decode the tax rules for e-sports athletes in India, so you can focus on fragging your foes and not stress about tax troubles.
Income classification
Know your income sources
E-sports athletes make money through multiple avenues: tournament winnings, sponsorships, streaming platforms like Twitch or YouTube, and brand endorsements.
All these earnings are taxable under the "Income from Other Sources" section of the Income Tax Act.
It's important for athletes to keep track of their earnings from each source to accurately file taxes.
Prize winnings
Prize money taxation
Any winnings exceeding ₹10,000 from a single event are subject to a 30% tax deduction at source under Section 194B of the Income Tax Act.
So, if an athlete wins ₹100,000 in a tournament, ₹30,000 will be deducted as TDS, leaving them with ₹70,000.
However, athletes should note that this TDS deduction doesn't absolve them of the responsibility to declare this income when filing their annual tax returns.
Saving smartly
Deductions and expenses
E-sports athletes can reduce their taxable income by claiming deductions for expenses incurred that are directly related to their profession.
These eligible expenses can include the cost of gaming PCs, peripherals, internet bills, and even rent for spaces used exclusively for gaming and streaming.
Plus, Section 80C provides deductions up to ₹150,000 on specific investments, further contributing to tax savings.
Service taxation
GST implications
E-sports athletes making over ₹20 lakhs a year need to register for Goods and Services Tax (GST). This is especially true for those who stream content online or have sponsorships.
The GST rate is currently 18%, so if you're making big bucks, make sure to factor in GST when planning your finances.
Foreign income
Navigating international earnings
Several e-sports tournaments take place internationally, and the prize money is often received in foreign currencies.
If the e-sports athlete is a resident of India (as per the Income Tax Act), such earnings are taxable in India.
The Double Taxation Avoidance Agreement (DTAA) between India and other countries can help by making sure you don't pay taxes twice on the same income.