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Over 10,000 e-gamers get I-T notices

New Delhi, Feb 10, 2023

The income tax department has served notices to at least 10,000 gamers, along with online gaming companies, seeking payment.

Although the Budget has signalled a shift in the tax regime, based on net winnings, tax authorities will have to treat these gamers differently and they will be covered by the current regime.

The notices were served a few months ago and the gamers, who received payouts of over Rs 10,000, for which tax was to be deducted at source, are being tracked by the department, sources told TOI. With responses yet to be received from several gamers who had received the notices, income tax authorities are yet to take a final call on the issue that has grabbed their attention in recent months.

Last year, the income tax department had raised a demand after Central Board of Direct Taxes (CBDT) chairman Nitin Gupta argued that players associated with these companies had netted Rs 58,000 crore over three years through 2021-22 as gross winning amount.

Currently, under the income tax laws, winnings from online games are taxed at 30%. If the winnings are above Rs 10,000, the gaming company must deduct tax on it. Section 194B of the Income Tax Act, 1961, has mandated that the person responsible for making payments to any person for income by way of winnings from lotteries or crossword puzzles will have to deduct tax at the applicable rate

In the Budget, finance minister Nirmala Sitharaman has left the levy unchanged at 30%, but has proposed to remove the Rs 10,000 floor for TDS. As a result, tax will be deducted on the net winning amount, with TDS to be calculated at the end of the year or whenever the money is withdrawn from the wallet used to play on the online platform

In the new regime, a setoff will be available for entry fees and other payments that are made by the gamers to the online platform.

The government believes that the new regime for online gaming will provide much-needed clarity, both to gamers as well as platforms, and deals with the issues of a sector that is growing at a rapid pace. The fate of notices served earlier is also being watched closely.

[The Times of India]

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