Telangana could be the first state in India to introduce comprehensive esports policies. Multiple stakeholders from the Indian gaming and esports industry recently met Telangana’s IT Minister D Sridhar Babu to address critical issues including taxation on esports prize pools, distinguishing between skill-based and chance-based games, and regulating gaming content creators.
Confirming these developments, Manoj Kasyap, owner of Velocity Gaming, a prominent esports organization based in Hyderabad, stated, “We have engaged with state officials and the IT Minister extensively to shape forthcoming policies and regulations. There is considerable interest in establishing governing bodies to oversee esports activities.”
The esports organizations on winning any esports tournaments are subjected to pay fixed flat tax of 30 percent under Section 194B of the Income Tax Act which governs lottery winnings taxation in India. In addition to the basic rate of 30 percent, a health and education cess at the rate of 4 percent of the amount of tax is levied. Thus the effective tax rate on lottery winnings comes up to 31.2 percent.
Kasyap emphasized, “We’ve specifically addressed concerns regarding the tax implications for esports tournaments, highlighting the unique nature of esports compared to money-based games. The state officials understand that esports is a very different space and acknowledged that esports and money based games are different.”
It should be noted that the professional esports sector in India, distinct from online gaming, was valued at nearly $40 million (Rs 333 crore) in FY23 and is projected to grow to $100 million by FY28, according to Lumikai, a venture capital firm.
Addressing broader industry distinctions, another stakeholder noted, “During discussions, we emphasized the differentiation between esports and online gaming (Real Money Gaming), underscoring the need for tailored regulatory frameworks. The government has shown a proactive stance in considering these nuanced laws, including the establishment of regulatory bodies.”
Furthermore, the Telangana government and stakeholders deliberated on bringing gaming and esports content creators within the purview of regulatory oversight. “Gaming content creators are integral to the ecosystem and must adhere to new laws to mitigate toxicity and ensure responsible content creation on video and streaming platforms,” added Kasyap.
Recently, Hyderabad has emerged as a hotspot for esports and gaming events. The Battlegrounds Mobile India Series 2024 by Krafton India, held at the Hitex Exhibition Centre, attracted over 5,000 spectators and garnered more than 500,000 registrations. Meanwhile, Nodwin Gaming’s DreamHack India, featuring tournaments across various titles, further underscored the city’s growing prominence in the esports landscape.