Finance Minister Nirmala Sitharaman on Wednesday proposed in the budget removing the TDS threshold of Rs 10,000 for online gaming. Also, the budget document said that earnings from online gaming will now be taxed at source.
Under the existing income tax laws, TDS is applicable on the winning amount from online gaming. Further, the online gaming winning amount is required to be reported under the head ‘Income from other sources’ at the time of ITR filing.
The FM, however, said that the government will issue a clarity on online gaming taxation. The online gaming industry has long been seeking consistency in taxation.
“For online games, it is proposed to provide for TDS and taxability on net winnings at the time of withdrawal or at the end of the financial year. Moreover, TDS would be without the threshold of Rs 10,000,” the budget document said.
“For lottery, crossword puzzles, games, among others, threshold limit Rs 10,000 for TDS shall continue but will apply to aggregate winnings during a financial year,” it said.
“The Online gaming sector needed an independent recognition which the budget proposals provided. Outlining a simplified withholding tax regime will go a long way in addressing the anxieties of online gaming intermediaries. However, certain ambiguities arising from the language of the provisions cannot be ruled out,” said Pranay Bhatia, Partner – Tax & Regulatory Services.
Recently, the IT ministry proposed to bring online gaming under the purview of the intermediary guidelines, introducing compliance requirements, user verification and a grievance redressal mechanism. The ministry wants to formalise a structure which has been in the works for some time since the Centre set up an inter-ministerial task force to regulate the online gaming sector.
