Tax on Online Gaming: Budget 2023

Earlier, video games used to play on consoles. Now, with the advancement of the internet, it is possible to play games online.

Online gaming including fantasy gaming is quite popular and has also become a dominant form of gaming globally. As per the stats in India, there were 183 million online gamers in 2017, which rose to 390 million in 2021, and is expected to reach 450 million in 2023.

The Budget 2023 updated and clarified the taxation aspect of this booming industry, which has warmly welcomed the new sections, giving them a unique identity.

Let’s have a look at the announcements for the online games in the budget 2023.

  1. It is proposed to deduct TDS at 30% of the net winnings. The TDS threshold of ₹10,000 is not applicable.
  2. Taxability shall be on net winnings at the time of withdrawal or at the end of the financial year, whichever is earlier.

What does this mean?

Before the budget 2023, if a person had income from online games, card games, lottery, crossword puzzle games, and other similar games, then TDS at 30% would be deducted u/s 194B if the income exceeded ₹10,000.

The budget 2023 proposed to insert a new section 115BBJ under the Income Tax Act specifically for online games. According to this section, for income earned by winnings from online games, the tax shall be levied on the aggregate of net winnings from the online games at 30%.

Moreover, there has been an introduction of a new TDS section 194BA particularly for online games, which shall be applicable from 1 April 2023. According to this section, any person responsible for making a payment for winnings from any online games during the financial year shall deduct tax on the net winnings at 30%.

However, for lottery, crossword puzzles, etc the threshold limit of ₹10,000 under section 194B shall continue but shall apply to aggregate winnings during a financial year.

Let’s try to understand this with an example.
Muskaan, a 24-year taxpayer, has an income in the following ways:

  1. Income from online games: ₹1,00,000
  2. Income from lottery: ₹2,00,000
  3. Taxable income from salary: ₹9,00,000

What shall be her taxable income and tax liability under the old regime as per the budget 2023-24?


From the above table, we can infer that lottery and online gaming income are taxed at a special rate of 30% under IFOS and salary income is taxed at a slab rate.

When Muskaan receives this income from lottery and online games, she receives the net amount after the TDS has been deducted, i.e, ₹1,40,000 and ₹70,000 respectively. When she files her return, she can claim the TDS as tax credits, reducing her tax liability.

Read more about Section 194BA: TDS on online game

Have questions? Shoot them here! Let’s engage in the conversation and get your doubts cleared.

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