Winnings from Online Games AY 2026-27
Winnings From Online Games
Introduction
Income from online games is taxable under Section 115BBJ of the Income-tax Act, 1961, at a flat rate of 30%. The Finance Act, 2023, introduced a new scheme for taxing such winnings, effective from the assessment year 2024-25. Tax is deducted at source (TDS) under Section 194BA at the rate of 30% at the time of withdrawal or at the end of the financial year if no withdrawal is made.
Meaning of an online game
“online game” means a game that is offered on the internet and is accessible by a user through a computer resource, including any telecommunication device.
Taxability of Winnings from Online Games
- Net winnings from online games is taxed underSection 115BBJat a rate of 30%, irrespective of whether it is a game of skill or chance.
- Net winnings are computed as prescribed underRule 133of the Income-tax Rules.
TDS Provisions on Online Gaming Winnings
- Section 194BAapplies to all online gaming winnings from 01-04-2023.
- Tax is deducted at 30% on the net winnings:
о At the time of withdrawal.
о At the end of the financial year if no withdrawal is made.
No Basic Exemption Limit
- The benefit of the basic exemption limit is not available
No deduction/allowance
- No deduction, including those under Chapter VI-A (e.g.,80C,80D), is allowed for income from lotteries, puzzles, races, games, gambling, or betting.
TAX ON WINNINGS FROM ONLINE GAMES
Scope of Section 115BBJ
- Applicable to all online games, regardless of whether they involve skill or chance.
- Overriding effect over other provisions, meaning professional gamers and casual players alike are subject to this tax.
- Includes winnings from fantasy sports, e-sports, and education-based games.
Computation of Net Winnings
Net winnings are determined using the following formula:
Net Winnings = (Withdrawals + Closing Balance) – (Opening Balance + Non-Taxable Deposits)
- Non-Taxable Deposits: Deposits made from already taxed income or non-taxable sources (e.g., borrowed money).
- Taxable Deposits: Any amount credited as winnings, including direct payments outside the gaming account.
- Withdrawals: Any amount withdrawn by the user, except transfers between accounts within the same platform.
If winnings are paid in-kind or outside the gaming account, an equivalent money value is assumed to have been deposited and withdrawn simultaneously.
Tax Deduction at Source (TDS) under Section 194BA
- Deductor and deductee can be any person.
- TDS at 30% applies to net winnings.
- Deduction occurs at the time of withdrawal or, if no withdrawal is made, at the end of the financial year.