Online gaming

IT department asks winners of online games to “voluntarily” pay taxes; Indian company under scanner

By IST (Released)


Direct tax officials are believed to be looking at data of winnings of up to Rs 58,000 crore over the past three years on an Indian online gambling platform. A GoM meeting on GST for online games is taking place today.

The Department of Income Tax has urged online gambling winners to disclose their income, file updated income tax returns (ITR-U) and pay applicable taxes.

Direct tax authorities are believed to be looking into data of winnings of up to Rs 58,000 crore over the past three years on an Indian online gambling platform, Indian Express has reported.

Although the Central Board of Direct Taxes (CBDT) declined to reveal the name of the online gambling company, citing the confidentiality clause of the income tax law, Chairman Nitin Gupta said the department had found earning data of around Rs 58,000 crore in the financial years 2019-20, 2020-21 and 2021-22. The onus is on the winners to get up to speed and pay taxes, he said.

“Taxpayers should come forward voluntarily and that’s the best thing,” Gupta told Indian Express, adding that the focus is on an Indian online gaming company.

The updated reporting feature, introduced this fiscal year under Section 139(8A), allows taxpayers to update information for the two previous tax years – FY20 and FY21. Through this, an assessee can file a return for any income that was not declared in the original return. The declaration will result in an additional tax payment of 25-50% of the tax assessments.

Till September 2, over 1.55 lakh updated ITR have been filed for both AY 2020-21 and 2021-22, the income tax department said. As a result of these updated declarations, over Rs 50 crore of undeclared tax payments have been remitted which is expected to increase in the coming days, Indian Express quoted a senior tax department official as saying.

Currently, online gambling winnings are taxable at a flat rate of 30%. “Every victory is taxed. It’s like the lottery. The loss cannot be adjusted against the win,” BusinessLine said quoting Gupta separately.

Meanwhile, a GoM led by Chief Minister of Meghalaya, Conrad Sangma, will discuss the GST assessment process on online gambling, casinos and horse racing today (September 5). The report will be presented to the GST Board later this month. The GoM had previously proposed a uniform GST rate of 28% across all three formats.

Currently, online gambling has a double tax system. The government levies an 18% tax on games of skill (not involving betting or gambling). Gambling (involving betting and gambling) incurs 28% GST. Online gaming apps typically have to pay 18% GST, while casinos and horse racing attract 28% GST.

India’s online gaming industry pays a GST of over Rs 2,200 crore, according to a recent study by EY and Assocham. Dream 11, GameKing and Nazara Technologies are the big players in this industry.