4 Sep 2015

Non-disclosure of offshore online gaming winnings channeled through e-wallets falls foul of new anti-black money law says government

The Central Board of Direct Taxes (CBDT) in a circular dated 3rd September, 2015 (Circular 15/2015) clarified that winnings from offshore online gaming or poker websites through e-wallets like Neteller would amount to ‘foreign assets and income’ and non-disclosure of such winnings would fall foul of the Undisclosed Foreign Income and Assets (Imposition of Tax) Act, 2015 (popularly known as the ‘anti-black money’ law).

In the circular published in FAQ format, the Central Board of Direct Taxes (CBDT) has said that e-wallet or virtual card is similar to a bank account and therefore ‘the valuation and declaration of an e-wallet account may be made as in the case of a bank account’.

The anti-black money law makes provision for penalising non-disclosure of foreign assets and income and provides a one-time compliance window until 30th September 2015, wherein defaulters can pay sixty percent tax and penalty and avoid prosecution. A concise summary of the anti-black money law prepared by PRS Legislative Research can be accessed here.

The latest clarification by CBDT adds to the ambiguity and confusion on taxation of online gaming activities. It may be noted that remittances for gaming are not permitted as per Schedule I of the Foreign Exchange Management (Current Account Transactions) Rules, 2000. A penalty of upto thrice the amount in question can be levied for contravention of these provisions.

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