By playing games, people become enthusiastic and become less stressed. However, during a pandemic, everyone finds themselves in a situation where they cannot leave the house. People are forced to talk on the phone always because of this. Traditional games are designed to be only for fun.
The Crypto game creators took advantage of this chance to redefine gaming by fusing enjoyment and profit. Numerous individuals are curious whether these games are legal as crypto gambling is there and whether there are any particular tax rules because they have become so popular.
This might not be significant to some people, but it deals with financial issues in this case, which is why the tax framework was created.
Tax Frame Work of Crypto games
Starting on April 1, 2022, the government will impose a 30% tax on the transfer of virtual digital assets, or VDAs. Since cryptocurrencies are considered VDAs, this tax is applied to cryptocurrency revenue without allowing for the deduction of any expenses other than the cost of acquisition.
On In-app purchase
The recently passed law impacts in-app purchases and reward points provided by cryptocurrency gambling applications. The government wants to charge transactions involving virtual digital assets 1% Tax Deducted at Source (TDS). Additionally, you would be charged TDS for in-app purchases and awards from cryptocurrency gambling apps, where the buyer is responsible for compliance.
Understanding Through Example
Using an example, understand how cryptocurrency gaming payouts are taxed. Let’s say you win five tokens worth Rs 10,000 from playing cryptocurrency games. In this instance, there are two taxable occurrences. First, when you win tokens, you are subject to a 30% tax on their market value. The recipient of the incentive must pay tax at a rate of 30% because it is regarded as a gift from the gaming corporation. It is equivalent to Rs 3,000, or 30% of Rs 10,000.
The sale or transfer of these tokens constitutes the subsequent taxable event. Once the acquisition cost has been subtracted, your tax rate is 30%. The market value of the tokens is considered when calculating the acquisition cost for tax purposes.
Let’s say you receive Rs 25,000 for five tokens. The selling price of the token is Rs 25,000; you must deduct the acquisition cost of Rs 10,000. You pay 30% in taxes on Rs. 15,000, which comes to Rs. 4,500. Note that there are currently no precise guidelines for calculating this tax.
Cryptocurrency Game Legal?
The government stated that while games of chance and skill are played in this area, only games of skill are permitted to be played legally. Crypto gambling is a game of luck or chance, so it is not legal, but it is also not prohibited.
The crypto tax affects people who play cryptocurrency games earn points and make in-app purchases. Moreover, the business worries that higher tax rates may discourage individuals from playing cryptocurrency games, hurting the sector. Although there is a lot of growth for cryptocurrency gaming, the industry’s future will be impacted by tax regulations on awards and in-app sales.