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Online Gaming Companies to Deduct Taxes on Net Winnings
The Central Board of Direct Taxes has issued guidelines for online gaming companies requiring them to deduct taxes on players’ net winnings, including bonuses or incentives. However, bonuses and incentives will not be taxed if they are not claimed or withdrawn. Net winnings will be calculated by subtracting the amount withdrawn by a customer from the total deposits in the account and opening balance at the beginning of the year.
Calculation of Net Winnings
Net winnings will be calculated by subtracting the amount withdrawn by a customer from the sum total of deposits in the account and opening balance at the beginning of the year.
Taxation of Bonuses and Incentives
Bonuses or incentives will not be taxed if they are not claimed or withdrawn by a player.
Rs. 100 Monthly Exemption
Online gaming companies will not be required to deduct taxes on winnings withdrawn by a player if the amount is less than Rs. 100 ($1.22) per month.
Deliberations on Taxation of Online Gaming Sector
A panel of state finance ministers met in December 2022 to deliberate on the taxation of the online gaming sector before submitting its report. The panel considered whether federal tax should be imposed only on profits of firms or on the value of the entire pool of money collected from participants. The panel was unable to reach a consensus in December.
Growing Popularity of Real-Money Online Games
The growing popularity of real-money online games in India has attracted foreign investors, such as Tiger Global and Sequoia Capital, to back local gaming startups Dream11 and Mobile Premier League, known for their fantasy cricket games.
Conclusion
The Central Board of Direct Taxes’ guidelines requiring online gaming companies to deduct taxes on players’ net winnings including bonuses or incentives seek to regulate the sector. However, exemptions for unclaimed bonuses or incentives and an exemption for winnings withdrawn below Rs. 100 per month provide some relief. Deliberations on how online gaming companies should be taxed continue, reflecting the sector’s growing popularity and importance to the Indian economy.
FAQ
What are the Central Board of Direct Taxes’ guidelines for online gaming companies?
The Central Board of Direct Taxes’ guidelines require online gaming companies to deduct taxes on players’ net winnings, including bonuses or incentives, but bonuses or incentives will not be taxed if they are not claimed or withdrawn.
How are net winnings calculated?
Net winnings are calculated by subtracting the amount withdrawn by a customer from the sum total of deposits in the account and opening balance at the beginning of the year.
Are there any exemptions for online gaming companies?
Online gaming companies will not be required to deduct taxes on winnings withdrawn by a player if the amount is less than Rs. 100 ($1.22) a month.
What is the status of deliberations on taxing online gaming companies?
A panel of state finance ministers was unable to reach a consensus on how online gaming companies should be taxed, reflecting the sector’s growing popularity and importance to the Indian economy.
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