Indian skill games industry urges Finance Minister to ease withholding tax

Several companies in the online skill games industry in India have made a representation to the Union Finance Minister Arun Jaitley to consider relaxing Tax Deducted at Source (TDS) norms applicable to games of skill websites..

The move follows the Easwar committee report on simplification of income tax procedures and hiking thresholds for TDS deductions, according to a recent press release.

The draft of the Easwar committee report has advocated increasing the TDS threshold for withholding income tax by companies to Rs. 15,000 from the current threshold of Rs. 10,000.

PK Jain, head of operations of Sachar Gaming Pvt. Ltd.,  a company which offers online rummy and poker through its website khelplay.com said, “We have made a representation to the Finance Ministry and petitioned Mr. Arun Jaitley to increase the TDS threshold for winnings from games of skill, which are unfairly bracketed in the same category as winnings from lotteries, gambling, casinos  etc.

Skill games like poker and rummy do not amount to gambling and there are several judgments by the courts to support this. An unreasonably low threshold for deducting TDS and high income tax of 30 percent on winnings, without allowing any deductions or setoffs does not bode well for the industry.

Jain adds that he has suggested that the Finance Minister should consider hiking the TDS threshold to Rs. 50,000 and the withholding tax should be reduced to 10 or 15 percent. Jain also states that he has submitted recommendations to the Easwar committee as well.

Jay Sayta, lawyer and founder of glaws.in, India’s only website tracking updates in the gaming industry, said: “The income tax and TDS rates for the skill games and gaming industry are unreasonably high and perhaps the highest in the world. Most other countries have a tax rate of 10-15 percent on such incomes and no concept of withholding tax.”

 Sayta added, “The United Kingdom for instance has no income tax on gaming winnings. Although the Easwar committee report has recommended hiking the TDS threshold on gaming winnings by Rs. 5,000/-, it is not enough. Mr. Jaitley should consider including a higher TDS threshold and lower income tax rate for winnings from games of skill in the upcoming budget to bring it in sync with global standards and changing times.”