Generally Online Gaming/Gambling laws in India prohibit betting or wagering and any act which is intended to aid or facilitate the same.

As per FEMA, 1999 Gambling is prohibited under schedule-I. Gambling here means selection of winners through lottery or luck by chance, where luck by chance arise it means gambling occurs.

Gambling is prohibited in India under Gambling act, 1967.

Supreme Court decided in Dream 11 case law that where winners are not decided by luck by chance it means it is not Gambling. Online gaming where players play the online game with their skill power it means online game with game of skill is not gambling.

When it was decided by various case laws that “GAME OF SKILL” is not gambling, hence online games like poker, rummy, dream 11 etc., where players use their mind for play that online game is not gambling and not prohibited under any act, “Game of Skills” has been allowed in India because prohibition is only for Gambling not for Game of skill.

1. LEGAL NORMS PREVAILING OVER THE TRANSACTIONAL METHOD FCASH/BITCOIN/CRYPTOCURRENCY INCLUSIVE OF PAYMENT SYSTEM DATA

a. Laws applicable

1- Prevention of money laundering Act, 2002

2- Payment and Settlement system Act, 2007

3- Information technology Act, 2000

4- Section 271DB & 269 SU of Income Tax act, 1961

5- Data Protection Bill, 2019

b. Transactional Mechanism

The payment method you have shall be net banking via NEFT and IMPS, credit and debit cards, and Neteller and Skrill available to deposit and withdraw.

c. Legality of Bitcoins/virtual currency in India

We can use Bitcoins only for Online Gaming Purpose as it is not a Legal Tender in India. Also, Ministry of Finance has clarified that virtual currencies (VCs), including bitcoins, are not currencies. “VCs are not currencies. These are also being described as ‘coins’ and there is however no physical attribute to these coins. Therefore, VCs are neither currencies nor coins.

The government or Reserve Bank of India (RBI) has not authorized any VCs as a medium of exchange.

Currently in many casinos e-wallet Solution are now being used since no bank process is going through and money is going from one account to another account.

To use Cryptocurrencies gamers do not have to provide any Financial Data.

There are various tax compliances shall be applicable on entity after start the online skill gaming business.

– Goods and service tax (GST)- Monthly payment and return filing.

– Tax Deduction at source (TDS)- Regular TDS deposit to government and return filing.

– Income tax compliances- Regular comply the compliances of income tax and provide financial statement on Monthly/Quarterly basis.

As per Section 115BB of the Income Tax Act, tax on winnings from gambling, lotteries, card games, prize competitions etc. is 30%.

a. For the Individual:

No set-off, carry forward or deduction for loss or expenses is permitted since this is a special type of income. Consequently, a flat rate of 30% plus applicable cess is payable by assesses irrespective of whether there is any other source of income or not.

b. For the Gaming Operator:

Gaming Operator have to deduct 30% as Tax Deducted at Source (TDS) on winnings exceeding Rs. 10,000/- {As per Section 194B of the Income Tax Act}.

Penalty on Non-deduction of Tax at Source:

While the website which does not deduct TDS on winnings above Rs. 10,000/- is liable to pay penalty and may face criminal prosecution, such non-compliance does not absolve the assessee from tax liability.

Conclusion: –

i. First Entity should establish a foreign subsidiary in India

ii. After this enter into various agreements with various authorities and take approvals from various authorities.

iii. Register its brand with Intellectual Property Authorities.

iv. Enter an agreement with software developer and website designer & payment gateway provider.

Author Bio

Qualification: CS
Company: Nitin Narang & Associates
Location: North East Delhi, Delhi, India
Member Since: 23 Jul 2020 | Total Posts: 10
Ayushi Verma is a Professional, Corporate Trainer , Sociopreneur, and a Perceptive Communicator with the capacity to engage, compel and liaise with colleagues, executives & external stakeholders. She is a Researcher, Writer and Outspoken activist. View Full Profile

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5 Comments

  1. vinaipal says:

    In GurdeepSachar Bombay High Court has held that Dream II is not gambling but involves skill and there is no GST evasion.However, the similar issue came before Rajasthan High Court in Chandresh Sankhla vs State of Rajasthan . and Varun Gumber vs UT Chandigarh Punjab and Haryana High Court has held that Dream II is not gambling.Issue of GST is kept open in Review Petition before Bombay High Court.

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