Union Finance Minister Nirmala Sitharaman, while presenting the 2023-24 Budget, announced that the tax deducted at source (TDS) on online gaming has been restructured — where earlier it was on winnings of at least Rs 10,000, not it is applicable to winnings of any size. The online gaming sector has welcomed this move, saying it beings a lot more clarity to how online gaming is taxed.

"(The government has) defined it specifically on net winnings, which is a great clarity. So I think, overall, it's a very positive outcome for Nazara, as well as the gaming industry as well as the consumer, or the player," said Nitish Mittersain, Founder, CEO and Joint Managing Director, Nazara Technologies.

He said so far, different companies applied different rates of TDS, and players were playing in different formats and different structures.

However, he conceded that how the new TDS structure is to applied remains a grey area. But one thing is clear — the TDS is applicable on net winnings. For instance, if one person is playing 10 different games, and in eight s/he makes a loss and in two makes a killing, they the gamer will only have to pay tax on the difference between the losses and gain.

Also read: Small savings schemes in focus after Budget 2023 — Check who benefits

"From my understanding up till now, it's very clear that it will be on the net winnings, which means that let's say you won Rs 10,000 and you lost Rs 8,000 while playing multiple sessions of the game, you would actually pay tax on Rs 2,000," he said, adding that it would have been an issue for the customers had it been on total winnings and not offset against the losses.

The real gaming business forms 5 percent of Nazara's business, and Mittersain said they now await clarity on GST and the definition of games of skill and games of chance.

"The Ministry of Electronics and Information Technology (MeitY) is keen on putting out a draft regulation for online gaming. And we're really hopeful after all the stakeholder inputs have been taken, a very balanced and positive regulation will be released in the next few months and implemented," he added.

Also read: India aims to cut its fiscal deficit by 0.7% annually for next two years

"I am also hopeful that the long pending clarity on GST will emerge in 2023, hopefully, sooner than later. So I think with these three, check boxes ticked, I think the opportunity for Nazara to really scale this business in real money gaming is very large," he said.

One other benefit of the clarity on TDS is that it will "will suffocate grey market operators and help increase consumer protection".

On whether taxation on any winnings will deter small-time gamers Mittersain saidthere might be short ter- friction, potentially, but will ease up in the long term. "I think it will not really matter. People are playing games for some entertainment, and they will continue to do so. A little bit of taxation is not a bad thing. And I think they will take it in their stride and move forward," he explained.

Also read: Why the tourism industry is disappointed with Budget 2023

First Published:Feb 2, 2023 3:36 PM IST