India proposes new rules to levy 30% tax on winnings from online games, removes ₹10,000 TDS slab

The government of India has proposed new rules under the Income Tax Act to define online gaming and levy a tax of 30% on net winnings from online games. The proposals were made in the Finance Bill 2023, which was released Wednesday after the budget presentation by finance minister Nirmala Sitharaman. 

The proposal to levy 30% income tax on net winnings from online games and define gaming was made in Section 115BBJ, which was added to the Finance Bill and will come into effect from 1 April 2024.  

“For the purposes of this section, online game shall have the meaning assigned to it in clause (iii) of the Explanation to section 115BBJ,” according to the Finance Bill 2023. 

The Finance Bill also added another section called Section 194BA, which gives the Securities and Exchange Board of India (SEBI) the power to create a process for the computation of deduction of income tax at the time of withdrawal of net winnings from online games. It will come into effect from 1 July.

Sitharaman in her budget speech also proposed to do away with the minimum threshold of ₹10,000 for levying TDS on winnings from online gaming. This means TDS will be charged even if the winning is under ₹10,000. Before the budget announcement, some sections of the gaming industry had urged the government to not remove the threshold. 

The gaming industry has welcomed the new sections on online gaming as it distinguishes them from online gambling. 

“We are happy to note that the Finance Bill carves out the distinction between betting and gambling activities and online games, through introducing a new section 194BA which taxes a user’s net winnings from online games at the end of the financial year,” said Roland Landers, CEO, All India Gaming Federation (AGIF). 

The online gaming industry in India has maintained that the games offered on real money gaming and fantasy sports platforms such as MPL and Dream11 are games of skill and are recognised by various high courts in India. They have urged the government to ban offshore betting platforms. In December, the Information and Broadcasting (I&B) Ministry asked Google to block the display of surrogate ads of overseas betting companies such as Fairplay, PariMatch, Betway, and 1xBet in search results and on YouTube. 

Last month, the ministry of electronics and IT (MeitY), which became the nodal ministry to govern online gaming on 23 December, proposed to bring online gaming platforms under the IT (Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021, which also regulates social media platforms.