During the Union Budget 2023-24, Union Finance Minister Nirmala Sitharaman announced the removal of the minimum threshold for TDS and clarify taxability relating to online gaming.
"For lottery, crossword puzzles games, etc, the threshold limit of Rs 10,000 for TDS shall continue but shall apply to aggregate winnings during a financial year,” Sitharaman added.
On winnings from online gaming, TDS is applicable in accordance with current income tax legislation. Additionally, while filing an income tax return, winnings must be declared under "Income from other sources" (ITR).
If each online game's winnings reach Rs 10,000, TDS becomes applicable. Additionally, winnings are subject to a 30 percent TDS deduction. However, from April 1, 2023, any amount won via online gaming will be subjected to TDS as per income tax laws.
Revenue Secretary Tarun Bajaj explained that the TDS will now be applicable only on net winning amount at the time of withdrawal from the game wallet and that the option to set off loses has also been given.
Reacting to the Budget announcements, Rohit Agarwal, Founder & Director of Alpha Zegus, a market-agency specializing in the domains of gaming and lifestyle, said, "Modifications to the TDS limit will impact the Real Money Gaming industry more than the Esports industry. Since esports games majorly do not have a system of 'money withdrawal', TDS does not impact them."
"As for the RMG industry, the removal of TDS threshold is a bit debatable. Most forms of income in India is considered under the Rs. 10,000 TDS threshold. If we consider 'winnings' as 'income', then the threshold should remain the same," he added.
Sunil Yadav, CEO, PlayerzPot said, "It is a welcome move to define the future of the online gaming industry to remove the minimum threshold of Rs. 10,000 for TDS and to clarify taxability. The action will result in transparency, a clear legal identity, and standardized taxation for online gaming."
In the last year's budget, the Finance Ministry had recognised the gaming sector as one of the potential segments for job creation in India.
In 2020, the Ministry of Information and Broadcasting (MIB) had announced an AVCG Centre of Excellence, expecting that the gaming sector and animation will become a major wealth generator for the country. Considering this, the MIB was allocated a sum of Rs 3,980.77 crore by the government last year.
According to a 2021 report by BCG-Sequoia India, the Indian gaming industry has generated at least $1.5 billion in revenue and is expected to triple this to over $5 billion by 2025.
Recently, the Ministry of Electronics and Information Technology (MeitY) announced an e-gaming policy, proposing self-regulation, mandatory verification for players and additional due diligence.
The Centre appointed MeitY as the nodal ministry for all online gaming-related matters. Online gaming firms would be covered under the new IT rules, issued in 2021 for social media platforms.
(Edited by : C H Unnikrishnan)
First Published: Feb 1, 2023 3:04 PM IST
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