Online gaming

Lens on winners to pay taxes, update ITRs

The tax authorities, both on the direct and indirect tax side, are trying to detect possible evasions in a major sector to come: online games. Direct tax officials have been told to review data of winnings of up to Rs 58,000 crore over a three-year period for an online gambling platform, urging taxpayers to come forward and pay tax. Meanwhile, a Group of Ministers (GoM) will meet on Monday to discuss the outlines of the Goods and Services Tax (GST) for online gambling, horse racing and casinos.

Chairman of the Central Board of Direct Taxes (CBDT), Nitin Gupta, has urged taxpayers to come forward and report undeclared winnings from the online gambling platform as part of the updated declarations, which allows taxpayers to update their information for the last two tax years, namely FY20 and FY21. “This is an Indian (online gambling) company… asking winners to come forward and file the updated return to pay the tax. Whatever data we have, we will continue. Taxpayers should come forward voluntarily and that is the best thing to do. Some may have earned more and some may have earned less, some may have earned millions and some may have earned small amounts. They are usually in a ledger account and they merge wins and losses, it’s (the data) huge,” he told The Indian Express.

GameKing, Dream 11, Nazara Technologies are big players in the online gaming industry. The online gambling industry currently contributes more than Rs 2,200 crore in GST, according to a recent study by EY and Assocham.

Tax authorities are asking taxpayers to use the updated reporting feature introduced under Section 139(8A) in this year’s budget to report such unreported transactions. According to the Income Tax Department, over 1.55 lakh of updated ITRs have been filed till September 2 and over 20,000 taxpayers have filed updated ITRs for AY 2020-21 and 2021-22.

“Over Rs 50 crore of undeclared tax payments have been released through these updated declarations. In the coming times, this is expected to increase,” said a senior tax official.

Lottery winnings or prize money from a contest are subject to a flat tax rate of 30 percent with no basic exemption limit. In such a case, the prize money payer will generally deduct withholding tax (TDS) from the winnings and pay only the balance amount.

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“No expenses allowed. If you lost the game, nothing is allowed. Every win is taxed. It’s like a lottery. The loss cannot be adjusted against the win. We are studying the matter and the number could be huge. We have collected data on this. We leave it up to taxpayers to come forward and pay taxes because there is a possibility of updated returns,” Gupta said.

The GoM on Casinos, Horse Racing and Lotteries should finalize the assessment process to tax these categories under the GST. He had previously finalized a uniform tax of 28% on all three categories, but was later given more time to consider his recommendations which will then be taken up at the next meeting of the GST Council, likely to be held in mid-September.