Categories
Gaming

Betfair stops accepting players from India

Leading international betting exchange Betfair has stopped accepting players from India effective 28th January, 2019.

In an email sent to its Indian users, the online betting behemoth informed that it would stop taking bets from Indian users and closing down access their website to users from India from 28th January.

The company further asked users to manage any open positions and withdraw any funds in advance of 28th January. Betfair in its communique to users did not specify the reasons as to why it was suddenly ceasing all India operations.

Currently, the Betfair.com website when accessed from India does not allow bets to be placed and gives the following message on its homepage: ‘Our Software detects that you may be accessing the Betfair website from a country that Betfair does not accept bets from. If you believe that this detection has occurred in error, please Contact us for further assistance.’

In November 2018, the All India Gaming Federation (AIGF), had written a letter to Prime Minister Narendra Modi stating that several offshore betting websites, including Betfair, are illegally accepting players and deposits from India in contravention of the Foreign Exchange Management Act, Prevention of Money Laundering Act and other laws.

AIGF had urged the PM to take action against the websites that are not complying with Indian laws and stated that an Enforcement Directorate (ED) probe is required to investigate the matter.

The gaming federation had further asked the central government should favourably consider licensing and regulating online sports betting within the country in light of the Law Commission’s recommendations and suggestions by other jurists.

Related Posts:
– June 25, 2019, Will a 2010 CERT decision to not block Betfair aid Delhi HC in the anti-betting PIL?
May 7, 2019, Jaipur police arrests bookies facilitating bets through Betfair

Categories
Business Events

Summary of webinar on taxation and fema related aspects of gaming winnings

iPleaders in association with Pokerguru.in and GLaws.in has published a summary of the webinar with Sunil Agarwal, Senior Tax Partner at AZB & Partners and former Additional Commissioner of Income Tax held  on 13th September, 2015.  The following are some key points that emerged from the discussion in the webinar:

FEMA implications

Schedule I of FEMA Current Account Transaction Rules prohibits drawing foreign exchange for remittance for purchase of lottery tickets, banned/prescribed magazines, football pools, sweepstakes, etc. abroad. Further, any amount in India that is earned through lottery winnings, income from racing/riding, etc., or any other hobby cannot be remitted abroad as per the schedule.

There is a possibility that the authorities may give a broad interpretation to the words hobby, sweepstakes, lottery etc. and therefore there is distinct possibility that poker winnings (irrespective of whether poker is judicially held to be a game of skill or not) will be part of the list of prohibited activities under the Current Account Transaction Rules. FEMA requires “residents‟ to bring back foreign currency earned abroad – so winnings need to be brought back.

Even if you are an exporter and hold a special account (called Exchange Earner’s Foreign Currency Account), funds need to be brought back before the end of the calendar year. In this regard, if you are not a person resident in India as per FEMA (this is different from the test of residence under Section 6 of Income Tax Act), there are workarounds. Second, if foreign exchange is not obtained from India but is independently invested from offshore earnings (e.g. of a business abroad), there may be scope to argue that the regulations do not apply. However, this is untested.

Compliances under the new Black Money law with regard to gambling/betting winnings remitted through e-wallets/directly from such websites

The amount and all accounts abroad need to be disclosed and filed as per Form 6. Valuation of assets must be done as per the rules  There is an exemption from penalty if the amount of undisclosed foreign assets under the Black Money law is less than Rs. 5 lakhs

To that extent, you can continue to hold money in offshore poker accounts. The option to disclose any income earned till 31st March 2015 but which was not disclosed elsewhere (e.g. under income tax law) is till 30th September 2015. This disclosure needs to be made under Black Money law. On this, you need to pay a total of 60 percent tax. Any income earned after 31st March 2015 can be disclosed under income tax law during the normal course of filing returns in 2016.

Disclosure under the Black Money Law brings about immunity from penalty under multiple laws including FEMA. It is however clarified that both the Black Money law and FEMA Current Act Transaction Rules will only apply if a person deposits or withdraws money on an international poker website located out of India. The Black Money law or FEMA Rules will have no application in a scenario where a player is depositing and withdrawing money in Indian Rupees on a poker website setup as per Indian laws.

Income Tax on winnings from poker or other games in India

As per Section 115BB of the Income Tax Act, tax on winnings from gambling, lotteries, card games, prize competitions etc. is 30%. 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. Even if there are no other sources of income and the income from gaming winnings is below the taxable slab, Income Tax would still be payable on the same.

Gaming websites also 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. 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. An assessee is required to disclose winnings from gaming activities and pay taxes at the time of filing the annual return/advance tax return even if TDS is not deducted on such winnings.

Withholding tax on winnings outside India

Whether or not India has a Double Taxation Avoidance Agreement (DTAA) with a foreign country offshore country, the Indian income tax law allows claiming credit of the amount deducted as withholding tax in the foreign country.

Note: Full summary of the webinar is available here and format for disclosure of black money winnings is available here.

Categories
Events

Webinar to discuss taxation and fema related aspects of gaming activities on 13th September

To clarify various queries on under the new Black Money law and general doubts on compliances under the Foreign Exchange Management and Income Tax Acts, iPleaders in association with GLaws.in and Pokerguru is organising a webinar with Sunil Agarwal, Senior Tax Partner at AZB & Partners and former Additional Commissioner of Income Tax on 13th September from 11 am- 12:30 pm.  The first-of-its-kind interactive session will be followed by a Q & A session with the expert.

Agenda of the Webinar:

1. Discussion on whether depositing and withdrawing winnings on offshore/international online gaming, poker websites etc. through e-wallets such as Neteller or directly amount to violation of Schedule I of the Foreign Exchange Management Current Account Transaction Rules.  Structuring alternatives available, if any.

2. Compliances under the new “Black Money Law” with regard to gambling/betting winnings remitted through e-wallets/directly from such websites particularly having regard to the clarification given in the recent Black Money circular.

3. Penalties under the legal framework, i.e. Black Money, Income Tax Act and FEMA and what you need to be wary of.

4. Taxation and disclosure of winnings from offshore/Indian poker and gaming websites when: (i) TDS is deducted by such websites and (ii) if no TDS is deducted. Possible ways to structure remittance of winnings to minimise taxation liability.

5. Taxation on winnings in physical casinos outside India when:

(a) such winnings are taxed at source in that foreign jurisdiction and India has a Double Taxation Avoidance Agreements (DTAA) with that country, and

(b) when India does not have a DTAA with that country.

(c) ways to structure channelizing the winnings to minimize tax liability in India.

Steps for Registering

1. Log on to – http://ipleaders.glaws.in/webinar-black-money

2. Click on – “Sign Up Now”

3. Make one-time payment of Rs. 1,020

On successful registration, users will receive a confirmation email along with the login credentials to join the webinar. The webinar has been limited to 60 participants only and carries a registration fee of Rs. 1,020.

Categories
Business Legal & Regulatory

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.

Categories
Gaming

Currency of the year Bitcoin gains popularity for online gaming transactions, will the Indian government regulate or prohibit Bitcoin transactions?

Virtual Peer-to-Peer currency Bitcoin generated a great deal of media attention this week as the value of the virtual currency increased exponentially after the Cyprus bailout and Eurozone crisis (the total value of Bitcoins in circulation was approximately US $ 2.6 Billion as on last week), where investors supposedly pulled their money out of conventional banks and invested it in Bitcoins.[See reports of Economist, Forbes, Time and Times of India].

As noted by popular online gaming news website Calvin Ayre here and here, Bitcoin has become extremely popular for online gaming transactions and a host of online gaming websites are offering payments and withdrawals in Bitcoin due to its anonymity, decentralisation and guaranteed authenticity.  [For more details on Bitcoin and how the currency functions, read Economist’s detailed explanation for beginners here]. Users are comforted by the fact that Bitcoin transactions are encrypted, safe and not traceable by government authorities. This enables them to freely use the currency for gambling and illicit activities online without any fear of liability and also provides a great tool for tax avoidance specially for online gaming transactions in India, where foreign remittances are barred under FEMA Rules and withdrawal of high-value winnings also attract the attention of the taxman and create a host of problems.

Will Bitcoin change the future of the online gaming industry?

 

Legality of Bitcoin in India

As of now, there is no law that prohibits purchase and sale of Bitcoin. Section 2(h) of FEMA defines currency as “currency” to include all currency notes, postal notes, postal orders, money orders, cheques, drafts, travelers cheques, letters of credit, bills of exchange and promissory notes, credit cards or such other similar instruments, as may be notified by the Reserve Bank of India.

Further, Section 2(m) defines foreign currency as any currency other than Indian currency (Indian Rupee). As of now, no notification has been issued by the RBI including Bitcoin or such similar virtual currencies under the ambit of the definition of currency. Thus, it is not illegal to possess, purchase or sale Bitcoin legally in India including for gaming transactions (it is a different matter however that online gaming websites can theoretically be blocked in India anytime by the law enforcement authorities).

However, once such a notification has been issued, it would be illegal to possess Bitcoin without prior approval and any contravention would lead to penalties up to thrice the amount in question as per Section 13 of FEMA.

That does not however mean that use of Bitcoins can be used for illegal activities and criminals would get a free run. Bitcoins would fall under the definition of property and hence tax has to be paid for investments in Bitcoin and sale/purchase of Bitcoin. Further,  use of Bitcoin for furthering  criminal activities or harbouring criminals would also be an offence under the Prevention of Money Laundering Act, 2002.

While as of now, law enforcement authorities in India and other countries have not taken any steps to prohibit or regulate the use of Bitcoins, it has to be noted that such Peer-to-Peer currencies are still in nascent stages of development (Bitcoins has its own problems and critics argue that the currency is volatile and unstable and hence would not be taken seriously);  action would certainly be taken to stop  the use of the currency for illegal activities even under present laws.

Whether there is a complete ban or regulation of the currency remains to be seen, but the fact that even if Bitcoin is banned,the fact that it would be nearly impossible to track the currency or its users means that this currency would be an alternative to hawala and black money transactions and would be an innovative way of evading taxes and preventing detection.This will certainly create serious problems for Enforcement Directorate, RBI and tax officials and encourage its use for gaming transactions though one would have to wait for regulatory developments and assess the stability of Bitcoin before deciding whether such currencies have the potential of changing the online gaming industry.