Over 10,000 e-gamers and online gaming firms have received notices from the income tax authority requesting payment. With a shift in the tax regime, these players will be subject to the current regime, but tax officials will be required to handle them differently.

According to sources who spoke with TOI, the notices were delivered a few months ago, and the department is now tracking the players who received payouts of more than Rs 10,000 for whom the tax was supposed to be deducted at the source.

Income tax authorities have yet to make a final decision on the matter that has captured their attention in recent months because they have not yet received comments from several gamers who had received the letters.

The Central Board of Direct Taxes (CBDT) chairman Nitin Gupta claimed that players connected with these companies had earned Rs 58,000 crore in gross winnings over the course of three years until 2021–2022, prompting the income tax department to file the demand.

Currently, winnings from online games are subject to a 30% tax under the income tax legislation. The gaming operator is required to deduct tax from winnings that are greater than Rs 10,000.

Finance Minister Nirmala Sitharaman recently announced significant changes to the taxation provisions for online gaming in her budget speech in the Lok Sabha. The finance minister recommended eliminating the Rs. 10,000 TDS floor while keeping the current 30% tax rate in the budget.

The threshold was removed because firms were utilizing it to split prize money into lower values than 10,000 to avoid paying tax.

The budget also noted that regardless of whether TDS is deducted under the new budget, winnings from online gaming must be declared on an income tax return, and the necessary amount of income tax must be paid.