Taxation - Income TaxQuestion 5628 of 146
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6. What is the requirement of deduction of tax at source by Game.com in respect of such winning by Mr. Desai?

Options

AGame.com needs to deduct tax at source amounting to ` 18,000.
BGame.com needs to deduct tax at source amounting to ` 5,400.
CThere is no requirement for deduction of tax at source. However, Mr. Desai need to collect tax at source from the security deposit.
DGame.com needs to deduct tax at source amounting to ` 6,000. (2 Marks)
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Correct Answer

Option None of the options is correctCorrect Option

All Options:

  • AGame.com needs to deduct tax at source amounting to ` 18,000.
  • BGame.com needs to deduct tax at source amounting to ` 5,400.
  • CThere is no requirement for deduction of tax at source. However, Mr. Desai need to collect tax at source from the security deposit.
  • DGame.com needs to deduct tax at source amounting to ` 6,000. (2 Marks)

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Detailed Solution & Explanation

Under Section 194BA of the Income-tax Act, 1961, tax is to be deducted at source on net winnings from online games at the rate of 30%.
- In this case, Mr. Desai won 6 shirts, which is a winning entirely in kind.
- The value of the winnings is u20b960,000\displaystyle \\u20b960,000 (based on the selling price of u20b910,000\displaystyle \\u20b910,000 per piece excluding GST) or u20b970,800\displaystyle \\u20b970,800 (including GST @ 18%).
- If the valuation excludes GST, the net winnings are u20b960,000\displaystyle \\u20b960,000, and the tax at 30% is u20b918,000\displaystyle \\u20b918,000.
- If the valuation includes GST, the net winnings are u20b970,800\displaystyle \\u20b970,800, and the tax at 30% is u20b921,240\displaystyle \\u20b921,240.
- If the valuation is based on the cost of manufacture (u20b93,000\displaystyle \\u20b93,000 per piece), the net winnings are u20b918,000\displaystyle \\u20b918,000, and the tax at 30% is u20b95,400\displaystyle \\u20b95,400.
- Under Section 194BA, where the winnings are wholly in kind, the deductor must, before releasing the winnings, ensure that the tax has been paid in respect of the winnings.
- Because of the ambiguity in valuation (whether to use manufacturer cost, selling price excluding GST, or selling price including GST) and the exact mechanics of TDS on winnings in kind, the official ICAI suggested answer key specifies that "None of the options is correct".

Hence, **Option None of the options is correct** is the correct answer.

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