Tax on sale of digital goods like video game skins

1. VDA or Not:

   • Video game skins or items are not treated as Virtual Digital Assets (VDA) under current Income Tax definitions (which cover crypto, NFTs, etc.).

2. GST:

   • No GST registration needed if total turnover (domestic + export) is below ₹20 lakh in a financial year.

3. Tax Treatment:

   • Income from trading game items can be shown as “Income from Business or Profession” if done regularly, or “Income from Other Sources” if occasional/small.

   • Taxed at normal slab rates, not at 30%.

4. ITR Form:

   • Use ITR-3 (if business activity) or ITR-2 (if income from other sources only).

Hi,

Please find below answer

a) Vidoe game skins are not considered as virtual Digital Asset (VDA) and hence tax under normal buisness

b) If yearly sales value exceed 20 LAcs than registration is mandatory

c) Its income from business only

d) depends upon other Income ITR 3 or ITR 4 will be applicable

1. No

2. No (assuming Rs.2 lacs is an annual turnover). If you are importing any services or goods for the purpose of business then you are liable for GST registration irrespective of turnover threshold

3. It can be treated as either "Income from business or Income from other sources" depending on the other facts. Income tax would be paid on net profit 

4. ITR-3 or ITR-4

For detailed discussion you may opt for phone consultation

1. Trading Skin/items of video games will not be covered under Virtal Digital Assets since VDA covers only items generated through cryptographic means. So they will not be taxed at 30%. They will taxed at normal slab rates.

2.Gst registration mandatory only after turnover crosses 20 Lakhs in a Financial Year. But if you do register voluntarily you can make this sales as zero rated sales and hence no gst will be payable and you can also claim GST refunds for GST paid on your payment gateway invoices and gst paid on other services procureed by you.

3. If you are not doing this as an occasional activity this will be considered as Business Income.

4. You can file ITR-4, ITR-3 in case of Business Income.

You can contact me for personal consultation for any queries.

Yes, you can avail presumptive taxation under section 44AD for your side business earning Rs 2 lakhs, and only 6% (Rs 12,000) will be considered taxable income. This income will be added to your salary income of Rs 12 lakhs, making your total taxable income Rs 12.12 lakhs, which keep you under the no-tax threshold.

Even if your actual profit is higher than 6%, you can still opt for 44AD and pay tax on the presumptive income/actual profit whichever is higher  without maintaining detailed books.

ideally you cannnot directly claim 6% benefit since thats minimum profit to disclose and not the only profit to disclose under section, authority may ask you question the expenses claim against it

However you can claim profit of around 50k which is 30% which will reduce charges of querry and still total income will not cross exemption limit so you can get advantage of tax

6% or actual profit whichever is higher would be considered as income u/s 44AD