Gift Tax Eligibility for Reverse Auction Website

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  1. jains

    jains New Member

    Dear Sir,

    I had a read about your article at http://www.charteredclub.com/gift-tax/ which was quite helpful.

    I still have a doubt regarding gift tax. I have a website where I am collecting Rs. 100-1000 from various people and then I conduct a game for them which is a skilled game and they compete with each other in the live game and whosoever wins that game he/she will get the prize which could be worth 100-1000 times more than I charged from them. Now my question is that the prize which I am giving to them does that consider as gift to them ? If its considered as gift then do I need to collect any TDS from them or they have to pay their income tax themselves ? If its not considered as gift then how does it work and what would be my liability as an organiser and the receiver's liability. Also let me know if there is any service tax applicable to me in the above scenario.
    Please let me know about these queries. I will be very grateful to you.


    Regards
    S Jain
     
  2. Karan Batra

    Karan Batra Well-Known Member

  3. jains

    jains New Member

    Dear Sir,
    I have gone through the link about tax on game shows provided by you but I would like to tell you that mine is not a game show. Its an auction website where people will be winning in auction and not in any game show. So in essence people will be winning bigger items like car at very low amount on my website so do I need to consider this as gift or what ? I am still confused and this issue is holding me back before the launch of my new startup.
    Basically person winning the auction is making an income because he is winning example Rs 10 lakh item in say Rs 2000, so he has to declare it in his other incomes I suppose but do I need to deduct TDS before giving him the product is doubtful to me. Please advice as your advice will help me launch my startup with confidence.

    I am happy to take your personal advice if possible.

    Thanks
    S Jain
     
  4. Karan Batra

    Karan Batra Well-Known Member

    If you refer to the article - it says Card Games and other games of any sort.

    The model mentioned by you would be considered as a game and therefore all provisions mentioned in the above mentioned article would apply
     
  5. jains

    jains New Member

    Dear Sir,
    I think I haven't explained it in right way. Basically I am taking money from people to enter into an online auction room similar to live auctions and then people will be auctioning amongst themselves in a similar manner as realtime auctioning (theonly difference is its reverse auction instead of forward auction) and at the end of the auction one person will win the auction which happens in other auctions as well like banks property auctions or IPL players auction. So when other auctions doesn't come under ambit of gaming then why would I be under gaming rules ? As I said its an auction presented in a different way.
    Now coming to the tax laws I want to know whether it will be considered as something else ? If gift then do I need to deduct their TDS or its their responsibility to declare their income under other income head or how does it work?

    Regards
     
  6. Karan Batra

    Karan Batra Well-Known Member

    This certainly is not a gift.

    Tax would certainly be levied. However, the exact applicability of tax would depend on the facts of the case.
     
  7. jains

    jains New Member

    Yes thats what I thought, its not a gift because people are paying for it although less as compared to its market value. I suppose if the tax liability will be there then that will the winner's liability to declare in his income. Or is it my liability to collect TDS money from him before handing over the product to him/her ? If you can clarify this then that would be great.

    Regards
     
  8. Karan Batra

    Karan Batra Well-Known Member

    It would depend on the facts of the case.

    I would advise you to personally consult some CA as this is a complicated case.
     
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