Thanks, I have tried gamescope but it kills the performance of games for me. All games have a lot of stuttering when I use it. It also didn't reduce the input latency. Same hardware is liquid smooth on Windows.

As far as I know niri enables direct scanout by default. It's an option you can disable if you want https://niri-wm.github.io/niri/Configuration%3A-Debug-Option.... I do not have this set which indicates direct scanout is enabled.

It's interesting because the latency is only when pressing keys on the keyboard. Mouse movement and button press latency feels as good as Windows, I can't perceive any delay. I tried 3 keyboards, it's all the same. I'm also not running anything like keyd or anything that intercepts keys. It's a vanilla Arch Linux system on both of the systems I tested.