Taxability of online games

Introduction:

1. Taxability of online winnings before the introduction of section 115BBJ of the Income Tax Act and section 194BA of the Income Tax Act, was governed by section 115BB of the Income Tax Act – taxability of income from lottery, crossword puzzles, etc. and section 194B of the Income Tax Act– TDS on income from lottery, crossword puzzles, etc.

2. Considering the distinctive nature of online games, the government decided to separate the taxability of tax winnings from online games.

Sec 115BBJ:
1. The rate of tax on online games shall be 30% excluding surcharge and cess.

2. The section is applicable from 1st April, 2023, i.e., any income from online games from the said date shall be taxable under this section.

Sec 194BA:
1. Any person responsible for paying to any person any income by way of winnings from any online game during the financial year shall deduct income-tax on the net winnings @ 30% at the time of withdrawal (without any threshold) of such winning amount.

2. “Any Person” here means the one making payments of winnings or online gaming intermediary.

3. “Net Winnings” is A – (B + C), where A is the amount withdrawn, B is the aggregate of non-tax deposits made by the user until the time of withdrawal and C is the opening balance at the beginning of the financial year.

4. “User Account” means a user who has registered with an online gaming intermediary, delivering one or more online games.

5. The section is applicable from 1st July, 2023, i.e., tax shall be deducted from any income from online games from the said date.