Finance minister Nirmala Sitharaman presented the Union Budget 2023-2024 today at the Lok Sabha. During her speech she stated that the government will provide clarification on how the taxation policy will apply to online gaming.
The announcement comes at a time when the online gaming business has been plagued by tax-related ambiguity and a lack of clarity on a number of issues, such as the amount of tax that will be assessed and what constitutes taxable income. The biggest issue in the argument over whether these games qualify as games of skill or chance still exists.
According to Sitharaman, “Major measures in terms of easing the taxation burden include removing the minimum threshold of Rs 10000 for TDS and clarifying taxability relating to online gaming; not treating conversion of gold into electronic gold receipts as capital gains, and more.”
The finance minister suggested that TDS and taxability on net wins be provided for by online gaming firms at the moment of withdrawal or at the conclusion of the fiscal year. She also suggested getting rid of the Rs 10,000 TDS threshold for online gaming.
“The threshold limit of Rs 10,000 for TDS shall continue but shall apply to lottery, crossword puzzles, and other games.”
The finance minister suggested that TDS and taxability on net wins be provided for by online gaming firms at the moment of withdrawal or at the conclusion of the fiscal year. She further stated: “Reducing TDS rates from 30 per cent to 20 per cent on taxable portion of EPF, withdrawals in non pan cases, and taxation on income for market link debentures.”
The government has been announcing significant developments for gaming and esports over the past few months, but the budget didn’t made special mention of these topics. Instead, it focused on clarifying tax policy and TDS clarity for internet gaming and lottery, which distinguishes online gaming from gambling.
Commenting on the budget announcement, All India Gaming Federation CEO Roland Landers told AnimationXpress “The online gaming industry welcomes the budget announcement by the hon’ble finance minister, particularly in relation to the rationalisation of direct taxation for online gaming. We are happy to note that the Finance Bill carves out the distinction between betting and gambling activities and online games, through introducing a new section 194BA which taxes a user’s net winnings from online games at the end of the financial year. While we await CBDT’s clarifications and guidelines in this regard, we are hopeful that the certainty in taxation offered by the budget announcement will be a huge stimulus for the growth of the online gaming industry.”
