Tax On Winnings From Online Games: Achieve Insights to Stay on Top of Your Financial Game

Introduction

An online game refers to a game available on the internet that a user can access through a computer resource, which includes any communication device. However, there is a tax on winnings from online games.

Any winnings from these online games will be subject to a tax rate of 30% as per Section 115BBJ. The person responsible for paying the winnings shall deduct tax at 30% from such winnings under Section 194BA.

New tax plan: Tax on winnings from online games

The Finance Act 2023 introduced a new taxation scheme effective from the 2024-25 assessment year. This applies to earnings from online games starting April 1, 2023, under which net winnings are taxed according to Section 115BBJ. The person responsible for paying these winnings under Section 194BA must deduct tax at source. 

Earnings before April 1, 2023, fall under the previous scheme: 

1. winnings from specified categories are taxable under Section 115BB, with TDS applied as per Section 194B or 194BB, 
2. while winnings from non-specified categories are taxable according to general provisions of the Income-tax Act.

Taxation on winnings from online gaming

Any winnings from online games will be subject to a 30% tax under Section 115BBJ if:

1. The games are made available on the Internet; and 

2. Users access these games via a computer resource, which includes any telecommunication device.

The income tax stipulated under this provision will be assessed on the net winnings from the online games accumulated during the previous fiscal year. 

TDS on winnings from online games

Any person in charge of paying earnings from online games must deduct 30% of the net winnings as tax, as per Section 194BA. This is typically done when the winnings are taken out or withdrawn. If no money is taken out, the tax is deducted from the net winnings in the user’s account at the end of the financial year.

Section 115BB v. Section 115BBJ  and Section 194B/194BB v. Section 194BA

Particulars	Winnings from online games		Winnings from any other source
	Games fall into specified categories	Games do not fall into selected categories	Games fall into specified categories	Games do not fall into selected categories
Tax rate	30% under Section 115BBJ	30% under Section 115BBJ	30% under Section 115BB	Applicable rate
TDS rate	30% under Section 194BA	30% under Section 194BA	30% under Section 194B or Section 194BB	As per relevant provisions of Chapter XVII
Taxable under which head	Other Sources	PGBP or Other Sources	Other Sources	PGBP or Other Sources

BY JAKS TRIVANDRUM