Online gaming: Lens on winners to pay taxes, update ITRs

Tax authorities on both the direct and indirect tax side are raising scrutiny for possible evasion in one major upcoming sector — online gaming. Direct tax officials are learnt to be scrutinising data for winnings to the tune of Rs 58,000 crore over a span of three years for an online gaming platform, urging taxpayers to come forward and pay taxes. Meanwhile, a Group of Miners (GoM) will meet Monday to discuss the contours of Goods and Services Tax (GST) for online gaming, horse racing and casinos.
Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta has urged taxpayers to come forward and report the undeclared winnings from the online gaming platform in the facility for updated returns, which allows taxpayers to update their information for last two assessment years, i.e. FY20 and FY21. “It is an Indian (online gaming) company … requesting the winners to come forward and file the updated return to pay the tax. Whatsoever data we have, we will proceed forward. Taxpayers should come forward voluntarily and it is the best thing. Some may have earned more and some less, some might have earned in millions and some in small amounts. They are usually in a ledger account and they merge win and loss, it (data) is humongous,” he told The Indian Express.
GameKing, Dream 11, Nazara Technologies are some big players in the online gaming industry. The online gaming industry is currently contributing more than Rs 2,200 crores of GST, as per a recent study EY and Assocham.

Tax authorities are asking taxpayers to make use of the updated returns facility introduced under Section 139 (8A) in this year’s Budget to report any such undeclared transactions. As per the Income Tax Department, over 1.55 lakh updated ITRs have been filed up to September 2 and more than 20,000 taxpayers have filed updated ITRs for both AYs 2020-21 and 2021-22.
“Over Rs 50 crore worth of undeclared tax payments have come in through these updated returns. In times to come, this is expected to increase,” a senior tax department official said.
Winnings from lottery or prize money in a competition are liable to a flat rate of tax at 30 per cent without any basic exemption limit. In such a case, the payer of prize money will generally deduct tax at source (TDS) from the winnings and will pay only the balance amount.
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“No expenses allowed. If you have lost the game, nothing is allowed. Each win is taxed. It is like a lottery. Loss cannot be adjusted against the win. We are looking into it and the figure could be huge. We have collected some data on that. We leave it to taxpayers to come forward and pay taxes as there is a facility of updated returns,” Gupta said.
The GoM on casinos, horse racing and lottery is expected to finalise the valuation process for taxing these categories under GST. It had earlier finalised a uniform 28 per cent tax on all three categories, but then was given more time to review its recommendations that will then be taken up in the next GST Council meeting, likely to be held mid-September.