The Central Board of Direct Taxes (CBDT) has taken note of pervasive tax evasion in the gaming industry and has urged the winners of online games to file taxes. Money won from playing online games in the previous fiscal year will be taxed if an ITR-U is filed, as announced by Finance Minister Nirmala Sitharaman in her 2022 Budget speech.
According to Section 115BB of the Income Tax Act of 1961, income earned from online betting is taxed at a flat rate of 30%, excluding cess. The net rate with cess adds up to 31.2%. Since the tax is deducted at the source, players must file their earnings similarly.
Winners will have to pay 30% tax along with interest without any rebates. They will also be liable to pay an additional 25-30% on the tax and the interest due. Taxpayers have two years after the end of the relevant assessment year to file an ITR-U, failing which they may face hefty penalties. Such heavy taxation laws run the risk of pushing more players away from this industry.