The Income Tax Department has urged winners of online games to disclose their incomes, file updated income tax returns (ITR-U) and pay the applicable taxes.
Direct tax officials are believed to be scrutinising data of winnings of up to Rs 58,000 crore over the past three years on an Indian online gaming platform, Indian Express reported.
Meanwhile, a group of ministers (GoM) is meeting on September 5 to discuss the recommendations of goods and services tax (GST) for online gaming, casinos and horse racing.
Although the Central Board of Direct Taxes (CBDT) refused to reveal the name of the online gaming company, citing the confidentiality clause of the Income Tax Act, Chairman Nitin Gupta said the department found winning data of about Rs 58,000 crore in the fiscal years 2019-20, 2020-21 and 2021-22. The onus is on the winners to update and pay taxes, he said.
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“Taxpayers should come forward voluntarily and it is the best thing,” Gupta told Indian Express, adding that the focus is on an Indian online gaming company.
The updated returns facility, introduced this fiscal under Section 139 (8A), allows taxpayers to update information for two previous assessment years — FY20 and FY21. Through this, an assessee can file a return for any earnings which were not reported in the original return. The declaration will attract an additional tax payment of 25-50 percent of tax dues.
Till September 2, over 1.55 lakh updated ITRs have been filed for both AYs 2020-21 and 2021-22, the Income Tax Department said. Through these updated returns, over Rs 50 crore worth of undeclared tax payments have come in, which is expected to increase in the coming days, Indian Express quoted a senior tax department official as saying.
At present, winnings from online gaming are liable for tax at a flat rate of 30 percent. “Each win is taxed. It is like lottery. Loss cannot be adjusted against the win,” BusinessLine quoted Gupta as saying separately.
GoM meet on GST
Meanwhile, a GoM headed by Meghalaya Chief Minister Conrad Sangma will discuss the valuation process for GST on online gaming, casinos and horse racing today (September 5). The report will be placed before the GST Council later this month. The GoM had earlier proposed a uniform 28 percent GST rate on all three formats.
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At present, online gaming has a dual tax rate system. The government levies 18 percent tax on games of skill (not involving betting or gambling). Games of chance (involving betting and gambling) attract a GST of 28 percent. Online gaming apps mostly have to pay GST at 18 percent, while casinos and horse racing attract GST of 28 percent.
The Indian online gaming industry pays 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.
