Indian Gov. Focuses On Players Who Are Not Paying iGaming Taxes
Most states in India continue to be under an intense lockdown as state governments struggle to control the spread of the COVID-19 pandemic. The nationwide lockdown has once again caused a spike in online gaming traffic as millions of Indians across the country turn to different online games to keep themselves entertained and see if they can win some prizes during these difficult times.
Central Gov. Focuses On Growing iGaming Market
Gambling is still banned in most parts of India, but due to the archaic Public Gambling Act of 1867, several offshore gaming operators have launched online casinos in India. As a result, these operators have witnessed an uptick in player traffic and new player registrations since the first wave of the COVID-19 pandemic in 2020.
Some states like Tamil Nadu and Andhra Pradesh decided to pass a ban on all forms of online gambling after gambling opponents filed public interest litigation (PILs) with the High Court claiming that online gambling was doing more damage than good in these states. However, even with the ban in these states, players continue to access offshore gaming sites as these state governments cannot properly enforce the bans.
While the iGaming industry continues to grow rapidly, the Indian government is now turning its attention to players who have won money playing online slots, table games and live dealer games but have not paid their taxes. Some reports show that nearly 40 percent of the Indian population has engaged with online gaming activities, but most do not report their winnings or pay their taxes on them.
iGaming Winnings Attract 30 Percent Tax
One of the reasons why most Indian players do not report their taxes on iGaming activities is because they know that iGaming is not explicitly legal in India. They are afraid that if they do report their online gaming winnings and taxes, they might get in trouble with the law for indulging in online gaming activities.
Some players do not disclose or pay iGaming taxes because they know that since the iGaming industry in India is unregulated, the government does not have full access to all of their gaming accounts and will find it difficult to monitor individual winnings.
However, the Indian government is now turning its attention to the iGaming market and will be cracking down on players who have avoided paying their gaming taxes in the past. Players who are not familiar with the tax laws surrounding gambling activities in India can read Income Tax Act, section 115BB, specifically addressing this area.
Player Accounts To Come Under More Scrutiny
The Indian government has not paid a lot of attention to the iGaming sector because it is unregulated. However, given the explosive growth of the Indian online gaming market, especially during the 2020 and 2021 lockdowns, the government is now looking to target players and force them to declare their winnings and pay their taxes.
Whenever an Indian player withdraws their winnings, it is generally credited to their Indian bank account, which is linked to their PAN and Aadhar cards. This enables the government to get access to all financial transactions. The government can look at any bank account and check if there are gambling-related transactions that have resulted in deposits.
While the government can do this, they may not have the resources to do this in the immediate future, given the fact that their main focus right now is to deal with the coronavirus pandemic and look to limit economic damage as much as possible. However, the long-term plan is to crack down on players who have not paid their gaming taxes and send a message to the rest of the online gaming community in India.
Crackdown On Cryptocurrencies
There are thousands of Indian players who have been converting their online gaming winnings into cryptocurrencies. By not withdrawing their winnings directly to their Indian bank accounts, these players have been trying to avoid the watchful eye of the authorities. As a result, their crypto assets have grown over the years, and players have converted crypto to fiat money instead.
However, the government has also announced a crackdown on cryptocurrencies and is very close to passing legislation that will completely ban cryptocurrencies in India. The current directive has resulted in some of India’s top crypto exchanges, including WazirX putting a stop to bank deposits and withdrawals.
Best Way Forward Is Regulation
While the government looks to crack down on iGaming and cryptocurrencies, there will still be loopholes that players will continue to exploit. So the best way forward for India is to legalize online gambling and capitalize on the millions of dollars in gaming taxes that it will bring in online gaming and betting taxes.
