Income Tax Department Issues Notices To 7 Online Gaming Companies & Dozens OF Players

In a major crackdown on online gaming firms and gamers, the income tax department has issued show cause notices to seven online gaming firms and over three dozen top players playing on these gaming platforms. As per ET reports, the IT department has issued these notices in the last 15 days.

In all these cases, the tax evasion is estimated around 28,000 Cr. According to an official, this may just be the tip of the iceberg and the actual evaded amount could be much higher than INR 28,000 Cr.

The IT department has also collected data on top gamers with over INR 50 cr in earnings. Some of these gamers are students and young IT professionals from Bengaluru, Pune and Gurugram.

“We have the data… We are in the process of issuing notices to some of the players and companies,” Nitin Gupta, chairman, central board of direct taxes (CBDT), said highlighting the tax evasion issue.

There has been some confusion around gaming taxation but CBDT is working out detailed guidelines on taxability of gaming sector. At present, they have to a 30% tax on winnings from games of chance.

Since each win over INR 10,000 is taxable, the income tax department has started issuing notices to gamers who have won online games, with an estimated winning a prize money of INR 58,000 Cr in the last 3 years.

The action comes closely on the heels of  Directorate General of GST Intelligence (DGGI) issuing a similar notice this month to a Bengaluru-based online gaming company GamesKraft Technologies Pvt Ltd asking the firm to pay INR 21,000 crore in GST on business transactions between 2017 and 2022. Gameskraft has challenged the notice and filed a writ petition at the Karnataka High Court.

Responding to the petition, the Karnataka High Court has set October 11 as the date for the next hearing in the Directorate General of GST Intelligence (DGGI) versus Gameskraft matter.