Finance Bill 2023 Differentiated Online Gaming from Gambling
With the adoption of the Finance Bill for the new FY 2023-24, Indian Income Tax legislation started differentiating between online gaming and gambling by subjecting them to separate regimes for collection of TDS (Tax Deducted at Source).
The new Finance Bill amended Section 194B of the Income Tax Act, 1961, to cover “gambling or betting of any form or nature whatsoever” and clarified that TDS is to be deducted from winnings exceeding in aggregate the amount of ₹10,000 for the financial year.
A new Section 194BA was introduced to treat TDS on online gaming winnings separately; the section didn’t include a ₹10,000 threshold, but specified that income tax deductions shall be done on net winnings for the financial year, i.e. on winnings minus paid entry fees.
Another major branch of tax burden for online gaming platforms and players – the GST regime, is still awaiting clarifications, which are now expected with the next meeting of the GST Council in June.
The final decision whether online games of skill will be taxed on full ticket value like games of chance, or will continue to enjoy GST applicability over their Gross Gaming Revenue or trade margin only, will have a great impact on the existing business models of Indian gaming companies and their prospects for growth.
According to data by KPMG, India’s online gaming market had 433 mn users and a value of ₹136 bn in FY 2020-21, and is expected to grow to 657 mn in users and ₹290 bn in value by FY 2024-24, spread across the following segments: casual (growing from ₹60.2 to ₹169 bn), real money games (from ₹49.8 to ₹61.3), online fantasy sports (from ₹24.3 to ₹54.3 bn), and esports (from ₹1.7 to ₹5.7 bn).
The Indian Online Casino Segment Is in a Maturing Trend
Wikipedia defines that a market is considered “mature” when it has reached a state of equilibrium between supply and demand and there is no significant growth or innovation present. Having KPMG’s growth expectations in mind, the Indian online gaming market can hardly claim to fulfil this definition, nevertheless, SevenJackpots have observed definite signs of maturity in the country’s casino online gaming segment.
Desi players of online chance games have devoured everything that the latest technology can offer in terms of live, interactive and immersive gaming experiences and are already acting as trendsetters in the sector.
“The Indian market shows remarkable maturity levels, with players ready for next-generation gaming products and solutions,” the SevenJackpots research paper on the Indian online casino market says.
“Real-money gamers in India have also developed a liking for roulettes, game-show wheels, and quick-play card games. Desi gambler communities follow and drive these global market trends, pushing gaming studios to create even more dynamic, colorful, and engaging games,” the study adds.
The most popular online casino gaming category in India according to the report is game shows – remakes of TV game shows in a casino setting with a live dealer, followed by roulette games, blackjack, and baccarat.