- Date : 06/04/2023
- Read: 3 mins
Net winnings online will now attract 30% TDS, irrespective of the amount won. Previously, the threshold was set at Rs. 10,000. With the removal of the threshold, the prize money minus the entry fee will have a 30% deduction.
From April 1, 2023, online game winnings in India will attract a 30% tax deduction at source (TDS). This move by the government has sparked controversy among online gamers, who argue that such a tax will discourage gaming and hinder the growth of the industry.
The tax applies to all online game winnings, including those from popular games like PUBG, Call of Duty, and Fortnite. The TDS will be deducted by the platform or operator from the winnings and deposited with the government. This means that gamers will receive a reduced payout, and the government will collect revenue from the industry.
Reactions to the taxation
The government's decision to tax online game winnings has been met with mixed reactions. Supporters of the tax argue that it will generate revenue for the government and promote responsible gaming. They argue that online gaming has become a billion-dollar industry in India, and it's time that the government collects its fair share of taxes.
Up until now, TDS was applicable on game winnings exceeding Rs. 10,000. But seeing as this would only encourage splitting of the winnings to keep it below Rs. 10,000, the threshold has been removed. The entry fee, however, has been excluded. Therefore, TDC is applicable on net winnings.
Opponents of the tax argue that it will hurt the online gaming industry and discourage gamers from participating. They argue that online gaming is already heavily regulated, and the tax will only add to the burden. They also argue that the tax will disproportionately affect low-income gamers who rely on online gaming as a source of income.
Also Read: Here Are Five Gaming Cryptos To Watch
The bigger picture
The online gaming industry has seen tremendous growth in recent years, with more and more Indians turning to online gaming for entertainment and income. It has the largest fantasy sports market, with the fastest growing percentage of new paying users in the world. The gaming industry in India is expected to grow by 20-30% in FY2023 and is expected to reach USD 4.6 billion by 2026.
While the tax may generate revenue for the government, it may also have unintended consequences. Gamers may choose to move to offshore gaming platforms where they can avoid the tax, leading to a loss of revenue for the government. This may also lead to a decrease in competition in the Indian gaming industry, as offshore platforms may have an unfair advantage.
Another concern is that the tax may discourage investment in the Indian gaming industry. Investors may choose to invest in countries with more favourable tax policies, leading to a loss of jobs and economic growth in India. This may also lead to a brain drain, as talented game developers may choose to work for companies in other countries.
the decision to tax online game winnings is a controversial one that has both supporters and opponents. While the tax may generate revenue for the government, it may also have unintended consequences for the online gaming industry. The government must strike a balance between generating revenue and promoting growth in the industry. This may involve creating incentives for investment in the industry, reducing regulatory burdens, and providing support for low-income gamers. Ultimately, the success of the online gaming industry in India will depend on the government's ability to create a favourable environment for growth and innovation.