The income tax department is getting tough on E-GAMING Community. The IT Department has served TAX notices to at least 10,000 gamers and more than 20 E-GAMING & Fantasy companies. According to a report by TOI, the notices were served in November and deparmtnet has seeked payments & levied penalties in the notices
Why did the IT department send out notices? The article states that the notices were delivered a few months ago. Players who have earned rewards of more than Rs 10,000 are given notifications.
According to the IT LAWS, Tax should be deducted at SOURCES for such payments.
The department has tracked these ‘DEFAULTERS’. The GAMERS who have been served notices are yet to respond to the department.
According to estimates of Central Board of Direct Taxes (CBDT) chairman Nitin Gupta the players associated with these companies had netted Rs 58,000 crore over three years through 2021-22 as gross winning amount.
The current income tax regulations tax online gaming winnings at a rate of 30%. The gaming operator is required to deduct tax from winnings that are greater than Rs 10,000. The person in charge of disbursing payments to anyone for income received in the form of lottery or crossword puzzle winners is required by Section 194B of the Income Tax Act, 1961, to withhold tax at the appropriate amount.
What the New Tax Regime says? The Budget recently has signalled a shift in the tax regime. It was proposed in the BUDGET that Rs 10,000 floor for TDS will be removed. Though the winnings will be TAXED at 30%. This means TDS will be calculated at the end of the year or whenever the money is withdrawn from the wallet used to play on the online platform.
-GAMING vs TAX Authorities: On September 8, the GST Intelligence issued a Rs 21,000-crore tax notice against Bengaluru-based Gameskraft Technology on charges of evasion
The union government according to reports has identified about 12 companies on Goods and Services Tax (GST) evasion charges, a senior government official recently was quoted by Outlook Business.
“The process of finalizing the names is on. There are about 10-12 such gaming platforms that would be investigated on the grounds of generating false invoices to evade paying GST. Tax notices would be sent out once the process is completed. There are many such companies that have come to the notice of the department on the grounds of tax evasion,” the official said.
A sizable number of people take part in real money-based fantasy leagues, card games, online competitions, etc. Section 194B of the Income Tax Act (the “Act”), which allowed for withholding tax on prizes from lotteries or crossword puzzles as well as card games and other games of any kind, has up to this point governed the withholding tax on such winnings. Only when the profits exceeded Rs 10,000 was TDS applicable. Additionally, section 115BB of the Act, which offered a tax rate of 30%, controlled the taxation of such gains in the hands of individual players.