Tax on Online Gaming in India: Explore Tax Implications in 2025

Nimisha Panda
May 8
21 min read

Updated: May 11

In India, the online gaming industry has seen a major growth in the recent years. It is primarily due to the increase in smartphone usage, better internet connectivity, and an ever increasing tech-savvy population. In 2024, the online gaming sector was valued at approximately $3.7 billion. It is expected to reach $5 billion by 2025. This will make India one of the largest markets for online gaming at global level. As the sector developed, it included a wide range of platforms, including skill-based games, fantasy sports, card games, and online casinos. This increase in gaming population, popularity, and revenue has also gained the attention of the Indian taxation system. In response to the rapid growth of the sector, the Indian government has introduced major tax reforms, including a 30% tax on net winnings. These measures aim to provide clarity and fairness in taxation, ensuring that both players and platforms adhere to the taxation guidelines.

Basis of Tax on Online Gaming in India

With the expansion of online gaming industry in India, the Indian Income Tax has also expanded its framework to include the same in its tax net. The government has introduced a clear guidelines for taxing the net winnings from online gaming. A flat tax rate of 30% is levied under Section 115BBJ of the Income Tax Act, 1961. This provision is applicable to both skill-based and chance-based games. Let us explore the key provisions of income tax on earnings from online gaming, calculation of net winnings, and applicability of tax to different types of games.

Flat 30% Tax Rate on Net Winnings

The net winning from online gaming is taxable at a flat rate of 30%, irrespective of the total income of the player. The net winnings is the amount left after deducting deposit amount or account balances from the total winnings. The flat rate simplifies the taxation process, thus, removing the complexity of income tax slabs and deductions that usually applies to other types of income.

Applicability of Section 115BBJ of the Income Tax Act, 1961

Provisions of Section 115BBJ of the Income Tax Act governs the taxation of winnings from online gaming in India. This section imposes a flat rate of 30% on net winnings. It specifically applies to the income derived from online gaming. It also includes the different types of games such as: skill-based games like fantasy sports, and games of change such as online casinos. With the introduction of this section a clear framework is established for taxing receipts from online gaming. This provision is separate from the general income tax rules.

Calculation of Net Winnings

For the income tax purpose, net winnings is calculated as the difference between total withdrawals and total deposits including the opening balance. The formula for calculating net winnings is:

Net winnings = Amount Withdrawn - (Total Deposits + Opening Balance)

This formula ensures that only the actual profits are taxed.

Tax Implication on Skill-Based and Chance-Based Games

Online games are broadly classified into skill-based and chance-based games. The difference between the both are explained in detail below:

Difference between Skill-Based vs Chance-Based Games

Category	Skill-Based Games	Chance-Based Games
Definition	Skill-based games are those that require player knowledge and skill to succeed.	Chance-based games are those that rely primarily on luck.
Examples	Fantasy sports, poker, chess, rummy.	Slot machines, online lottery, bingo.
Tax Rate	30% on net winnings under Section 115BBJ	30% on net winnings under Section 115BBJ
Revenue Generation	More consistent participation due to skill-based strategies.	Player engagement varies based on prize pool and odds.
Player Participation	Players often play repeatedly, relying on skill development.	Player participation can fluctuate depending on luck.
Tax Implications for Operators	More predictable revenue and player base.	Revenue may vary greatly based on player participation and luck-driven outcomes.
Impact on Compliance	Clearer game strategies and player behaviors make compliance easier for operators.	Variability in player outcomes and game patterns might create occasional compliance challenges.

Tax Treatment for Each Category

Both types of games are taxed at a flat rate of 30% under Section 115BBJ. However, the tax treatment differs in terms of revenue generation for the platform and participation of the players. For example, skill-based games may attract more consistent players, whereas, chance-based games may see fluctuations in player engagements depending on the prize size and chances of winnings. Irrespective of these differences, the common tax rate promotes simplicity and clarity for both players and operators throughout the online gaming sector in India.

Example of Tax on Online Gaming

In order to compute tax on earnings from the online gaming, it is necessary to calculate the net winnings. The net winnings is the difference between the amount deposited and the opening balance in the gaming account from the total amount withdrawn. It ensures that the actual profit earned from playing the game is brought to tax and not the initial investment of the player.

For instance, if a player Mr. X withdraws ₹100,000 from his account, deposited ₹60,000 during the financial year, and had the opening balance of ₹10,000, the net winnings would be ₹30,000 (₹100,000 withdrawal – ₹60,000 deposit – ₹10,000 opening balance). The 30% tax rate wil be applied to this ₹30,000.

Let’s consider another example. Suppose a player Mr. Y has deposited ₹50,000 during the year to his online gaming account. He won ₹80,000 while playing various games. At the end of the financial year, he withdrew ₹70,000. The opening balance in the beginning of the year was ₹20,000.

His net winnings would be ₹0 (₹70,000 withdrawal – ₹50,000 deposit – ₹20,000 opening balance)

As the net winnings of Mr. Y is ₹0, no tax will be levied on the same. Had the net winnings would be positive, a flat rate of 30% will be applied to the same.

TDS Implications on Online Gaming

Online gaming platforms are required to deduct TDS (Tax Deducted at Source) under Section 194BA from the net winnings of the players. As per the provisions of this section, TDS is dedicated at the time of withdrawal or at the end of the financial year, whichever is earlier. The TDS is deducted at the rate of 30%, irrespective of the total income and other tax deductions of the pllayer.

For example, if a player wins ₹50,000 and withdraws the entire amount, the platform will deduct a 30% TDS of ₹15,000 on ₹50,000. This ₹15,000 will be remitted to the government, and the net amount of ₹35,000 will be remitted to the player. Later on, while filing the ITR, the player will disclose the gross income of ₹50,000 and claim ₹15,000 as TDS credit.

How much Tax Players have to Pay on Online Gaming?

The tax liability of the players is dependent on the net winnings they withdraw from the online gaming account. For example, if a player withdraws ₹100,000 after a successful gaming session, and the net winnings for that year was ₹100,000, he will be subject to a 30% tax deduction on ₹100,000. This ₹30,000 will be deducted at the time of withdrawal.

Even if the TDS is deducted at the time of withdrawal, the player will have to report these earnings in the ITR and its respective TDS. If the TDS deducted exceeds the tax liability of the player, he will be eligible for the income tax refund. It can be claimed while filing the Income Tax Return (ITR).

Basis of Revenue Collection and Chargeability

The basis of revenue collection on the online gaming platform depends on 2 main channels: TDS on winnings and GST on the total value of bets. The gaming platforms are required to deduct TDS from the winnings amount of the players as per the prescribed rate and remit the said amount directly to the government. The gaming platforms are also required to pay GST (Goods and Services Tax) at the rate of 20% on the total value of bets placed by the players. Thus, impacting both players and the platform operators.

Moreover, the gaming platforms are obliged to maintain a clear record of the gaming activity, including deposits, withdrawals, and net winnings, so as to ensure proper tax collection and reporting.

What is the Role of Gaming Platforms in Collecting Taxes?

The online gaming platforms play an important role in collecting taxes. They are responsible for deducting TDS @30% on the net winnings of the players. The platform has to ensure that the TDS so deducted is deposited with the government. Moreover, they must also adhere to the GST regulations by collecting and depositing 28% GST on the total value of bets placed by the players.

What is the Process of TDS Deduction by Online Platforms?

Following is the process of TDS deduction by online platforms:

Calculation of Net Winnings: The net winnings of the players is calculated by the platforms by deducting deposits and the opening balance from the total amount withdrawn.
Deduction of TDS: The platform is required to deduct a TDS at the rate of 30% from the net winnings at the time of withdrawal or year-end, whichever is earlier.
Payment of TDS: The platform is required to remit the TDS amount to the government and issue a TDS certificate to the player.
Filing of Income Tax Return: Using the TDS certificate, players must report their total winnings and TDS in their income tax return.

Do Players have to Comply with PAN and KYC Requirements?

Yes. In order to comply with the provisions of TDS, players have to provide a valid PAN (Permanent Account Number) and complete the KYC (Know Your Customer) formalities with the online gaming platforms. This will ensure accurate deduction of TDS and correct credit of the TDS amount to the player’s account. The PAN is useful for tracking the tax obligations of the players to prevent tax evasion. The KYC will enable verification of player’s identity and ensures that the platform is compliant with the regulatory requirements.

How are Online Gaming Winnings are Taxed under the Income Tax Act in India?

The winnings from online gaming are considered as ‘Income from Other Sources’ under Section 56 of the Income Tax Act. It means that winnings are taxable at a pre-defined rate and must be reported as a part of the total income of the players. The winnings are subject to 30% TDS irrespective of the total income of the players. Players must report the gross winnings and respective TDS in their ITR.

Income from Other Sources and Online Gaming: An Understanding

The Income Tax Act considers online gaming winnings as an ‘Income from Other Sources’. It means the same is taxable aside from business income or salary income categories. Moreover, players must report their earnings separately from gaming in their income tax returns and its respective TDS. Further, this income from winnings is not eligible for deductions under Sections like 80C. Also, the losses from gaming is not eligible for set off against any other income. Thus, players need to carefully keep a track of their winnings and the respective TDS as deducted by the platforms to ensure compliance with the Income Tax.

Comparison of Old and New Tax Provisions on Online Gaming Taxation

The following table shows the comparison of old and new tax provisions on Online Gaming Tax:

Aspect	Old Provisions	New Provisions
Relevant Provisions	Taxation of winnings under Section 115BB	Taxation of winnings under Section 115BBJ
TDS Section	TDS under Section 194B	TDS under Section 194BA
TDS Threshold	TDS applicable only if winnings exceeded ₹10,000	TDS applicable on all net winnings, with no threshold limit
Effective Dates	Taxation of winnings: Up to 31st March 2023	Taxation of winnings: From 1st April 2023
	TDS applicable: Up to 30th June 2023	TDS applicable: From 1st July 2023
TDS Rate	A flat 30% on winnings	A flat 30% on winnings
Timing of TDS	Deducted at the time of payout	Deducted annually at the end of the financial year, with an additional deduction at the time of withdrawals during the year
Winnings in Kind	Tax must be paid before the winnings are released	The platform must ensure taxes are paid before releasing the winnings
Income Tax Rate	30% on winnings	30% on winnings
Calculation of Taxable Income	No specific instructions on the treatment of gross vs. net winnings	Taxable income is calculated based on net winnings, with guidelines for the computation expected in future provisions

Key Differences:

TDS Limit: Earlier, TDS compliance was applicable only when winnings from online gaming exceeded ₹10,000 in a single transaction. However, as per the new tax provisions, TDS is deducted on all net winnings, without any threshold.
Effective Date: The new tax rules and TDS became applicable from April 1, 2023. TDS deductions taking effect from July 1, 2023.
Winnings in Kind: The new tax provisions emphasize that gaming platforms must ensure TDS compliance on net winnings before releasing any winnings. Especially for winnings in kind (e.g., prizes instead of cash), which was less explicitly defined under the old rules.
Annual TDS Deduction: Under the new tax provisions, TDS will be deducted annually, reflecting the total net winnings in the user’s account at the end of the financial year, with an additional deduction at the time of withdrawal during the year. This shift aims to streamline the tax process and make it more predictable for players.

GST on Online Gaming in India

The online gaming platforms are subject to 28% GST on the total value of bets placed by the players. This is one of the highest GST rates applicable on any sector. This has raised concerns about the impact on gaming operators, especially small platforms. The GST is applicable on all types of games, whether skill-based games like fantasy sports and rummy or chance-based games like online slots, poker, and betting.

The 28% GST is applicable on the total value of the bets placed by the players. This means, GST has no relevance on wins or loses of the player. The gaming platform is obligated to remit GST based on the total bets placed and not just the winnings. This is significantly different from other sectors where GST is applicable on the service or goods provided. Thus, it is making the gaming sector’s tax burden much heavier.

How GST has impacted the Gaming Companies and Players?

The 28% GST on the total value of bets has increased the operational costs for the gaming companies especially for platforms that offer free-to-play games or low-stakes options. These platforms may face difficulty in bearing the GST cost without passing it on to players. This in turn will lead to higher entry fees or reduced winnings. For players, the GST results in a higher cost of playing. Since, a part of their wager is diverted to taxes rather than contributing to their winnings.

Difference in GST Treatment for Skill-Based and Chance-Based Games

The GST treatment for skill-based games and chance-based games is essentially the same, with both types of games being taxed at the same 28% rate. However, the GST law does not differentiate between the two in terms of the tax calculation, which has drawn criticism from operators of skill-based games who argue that their services should be taxed at a lower rate due to their reliance on player skill rather than chance.

Registration and Compliance for Gaming Platforms

Online gaming platforms must register for GST if their annual turnover exceeds ₹20 lakhs. This registration allows them to collect GST from players and remit it to the government. Platforms must also ensure proper invoicing and filing of GST returns on time to comply with the regulations. Non-compliance with GST rules could result in penalties and legal action.

Who Needs to Register for GST?

Gaming platforms with an annual turnover above ₹20 lakhs must register for GST under the current law. This applies to both domestic and international platforms that provide online gaming services to Indian users. Platforms that do not meet the turnover threshold are not required to register for GST but may still opt for voluntary registration if they wish to claim input tax credits.

Reporting and Filing for Online Gaming Platforms

Gaming platforms must report and file GST returns monthly or quarterly, depending on their turnover. The returns include details of total bets placed, GST collected from players, and the GST paid on services provided. Accurate reporting and timely filing are essential for compliance and avoiding penalties. Platforms must also keep track of the TDS deductions for their players to ensure proper alignment with the income tax provisions.

Legal Framework for Online Gaming

Online gaming in India is primarily governed by the Income Tax Act, 1961, which outlines the taxation of winnings, including those from online games. The Finance Act 2023 introduced significant amendments, including a flat 30% tax rate on net winnings, which applies to all players. In addition to income tax regulations, online gaming platforms are subject to Goods and Services Tax (GST) at a rate of 28% on the total value of bets placed. Other laws such as the Public Gambling Act, 1867, govern the legality of gaming platforms, though this Act is often outdated and inconsistent with the modern digital gaming landscape.

Key Regulatory Authorities and Their Role

The Central Board of Direct Taxes (CBDT) plays a crucial role in overseeing the taxation of online gaming. It ensures the proper application of the Income Tax Act and oversees the implementation of TDS provisions under Section 194BA. The Goods and Services Tax Council (GSTC) is responsible for setting the GST rates applicable to gaming platforms. Additionally, state-level authorities are responsible for regulating and licensing offline and online gambling platforms, with the E-Gaming Federation (EGF) and the Federation of Indian Fantasy Sports (FIFS) advocating for industry interests and regulatory clarity.

Legal Challenges in Online Gaming Taxation in India

One of the key challenges in online gaming taxation in India is the ambiguity surrounding the definition of "online gaming" and its classification as a game of chance or skill. The evolving nature of online gaming, with games blending elements of both skill and chance, complicates the application of consistent tax rules. Furthermore, the imposition of a flat 30% TDS on all winnings, with no threshold, has led to concerns regarding the administrative burden on smaller operators and the gaming community, especially considering the rapid growth of fantasy sports and esports.

Legal Implications for Non-Compliance: Consequences for Players and Gaming Platforms

Failure to comply with tax obligations can result in significant penalties for both players and platforms. For players, the consequences of failing to report winnings or underreporting earnings include legal action, fines, and potential audits by tax authorities. For platforms, non-compliance with TDS and GST regulations can result in hefty fines, suspension of operations, and damage to reputation. Platforms must ensure that all TDS deductions are accurately made and reported, while players are responsible for correctly reporting their winnings and the taxes already deducted.

Penalties for Non-Deduction of TDS by Platforms

If gaming platforms fail to deduct TDS as per the rules, they face substantial penalties, including fines, interest charges, and the possibility of tax evasion charges. Platforms must also ensure that they remit the TDS amounts to the government on time. The failure to do so may result in additional scrutiny and penalties from the tax authorities, potentially jeopardizing their operations.

Role of Court Cases and Pending Legislation

There have been several key court cases in India that have influenced the tax treatment of online gaming. Notably, Supreme Court cases related to games of skill have provided legal clarity on whether certain online games should be considered games of skill (like fantasy sports) or games of chance (such as poker and online slots). These rulings help shape the legal landscape for gaming taxation, ensuring that the tax framework remains aligned with evolving judicial interpretations.

Impact of Taxation on Online Gaming Industry

The implementation of a 30% tax on net winnings and the addition of a 28% GST have a significant impact on the business models of online gaming platforms. These taxes reduce the net earnings of both the platform operators and the players, potentially leading to higher costs for consumers. Platforms may need to revise their pricing strategies, adjust fee structures, or introduce new financial models to offset the increased tax burden.

Adjustments for Operators to Comply with TDS and GST

To comply with TDS and GST regulations, gaming platforms will need to invest in enhanced compliance mechanisms, including robust accounting systems and automated TDS deduction features. This may involve substantial operational costs, particularly for smaller platforms. Some operators may seek tax optimization strategies or adjust their game offerings to mitigate the financial impact of these taxes.

Effect on Players’ Winnings and Participation/ How Taxation May Impact Player Participation and User Behavior?

The 30% tax on net winnings may discourage some players, particularly those with smaller winnings, as it reduces the amount they receive after withdrawals. For high-frequency players, the cumulative tax burden could lead to lower participation or a shift to international platforms with more favorable tax regimes. However, the clarity provided by the tax regulations could also encourage more legitimate engagement in the market, as players are now aware of the rules and their obligations.

The increased tax burden on both players and platforms may impact the overall user experience in several ways. For players, the feeling of being taxed at a flat rate of 30% could diminish the enjoyment of gaming, particularly for casual players. For platforms, the need to manage TDS deductions and report transactions accurately can increase operational complexity, potentially affecting user experience if these processes are not streamlined effectively.

Market Projections and Industry Growth Post-Taxation

Despite the tax changes, the Indian online gaming industry is expected to continue its robust growth, albeit at a slightly slower pace. Projections suggest that the industry will still reach $5 billion by 2025 and $9.1 billion by 2029, driven by increasing smartphone adoption and the growing popularity of fantasy sports and esports. However, the higher tax rates could prompt some players to seek platforms outside India or choose lower-stakes games, which might affect the revenue of certain platforms.

The taxation framework may lead to consolidation within the industry, where smaller platforms that struggle with compliance costs may be absorbed by larger, more established companies. As competition decreases, leading platforms could see more revenue generation opportunities through a more regulated market, with higher user trust and adherence to legal requirements.

Global Comparison: Online Gaming Taxation Around the World

Overview of Online Gaming Tax in Other Countries

Many countries have implemented specific tax policies to regulate online gaming, though the approaches vary significantly. In countries like the UK, online gaming is taxed under a remote gaming duty, and winnings are generally not taxed. However, operators must pay taxes on their profits. In Australia, both TDS and GST are levied on online gambling, with GST rates ranging from 10% to 15%. Other countries, including Germany, France, and Spain, also have varying taxation rules, often based on the type of game and the platform's revenue.

Taxation Systems for Online Gaming in Key Global Markets

The UK offers one of the more player-friendly taxation systems, where players’ winnings are not taxed. However, operators are taxed based on the profits they generate from gaming activities. In Australia, the gaming industry faces both GST and state-based taxes on gambling, while in Germany, winnings from online gambling are taxed at a relatively low rate, but operators must pay higher taxes on revenue.

How India’s Tax Regime Compares Internationally

India’s online gaming taxation regime, with a 30% tax on net winnings and 28% GST, places it among the more heavily taxed markets for online gaming. Compared to the UK, where player winnings are not taxed, or Australia, where players face no income tax on their winnings, India’s higher tax rates could discourage participation, especially for casual gamers. However, India’s taxation regime is in line with other countries like France and Germany, where both operators and players face significant tax obligations.

A Comparative Look at India’s Taxation Framework

India's approach to taxing online gaming provides clarity and a structured framework but at a cost for operators and players. Compared to more player-friendly countries, India’s high GST and TDS rates reflect a more aggressive stance on revenue generation from the booming online gaming sector. However, for a growing industry, balancing taxation with the need to maintain a competitive environment will be key to its continued growth.

Lessons from Other Countries’ Approaches to Taxing Online Gaming

Other countries have shown that balancing competitive tax rates with the need for regulation is essential for fostering growth in the online gaming sector. India can learn from jurisdictions that offer lower tax rates for players and more favorable tax incentives for operators, which helps in creating a more robust and sustainable online gaming ecosystem.

Impact of Online Gaming Taxation on Startups and New Entrants/ How the Taxation Impacts Smaller Platforms and New Market Players

The introduction of the 30% tax on net winnings and the comprehensive TDS obligations has a significant impact on smaller online gaming platforms and new entrants. These platforms often struggle with compliance due to limited resources and the complex nature of tax reporting. The no-threshold rule for TDS means that even small winnings will be taxed, making it difficult for smaller operators to compete with larger, more established platforms. Furthermore, the increased operational burden of calculating and remitting tax to the government adds extra costs for newer companies.

Opportunities and Challenges for New Entrants in the Market

For new entrants in the online gaming space, the tax landscape presents both opportunities and challenges. On the positive side, the government’s push for clearer regulations can create a more structured and secure market, reducing the risk of illegal operators. This can create opportunities for startups to innovate within a defined framework. However, the high tax rates and complex TDS requirements may act as a barrier to entry for smaller platforms, who might struggle to navigate the compliance process while also competing for market share. Moreover, the GST on total bets (28%) and the 30% tax on winnings could make it difficult for new platforms to keep prices competitive, especially when compared to international competitors or informal, unregulated platforms.

Conclusion

The online gaming industry in India is at a crossroads. With the introduction of comprehensive tax rules in the Finance Act 2023 and the proposed changes under the Income Tax Bill 2025, the sector is moving towards a more regulated environment. While these changes aim to bring clarity and fairness to the industry, they also pose challenges, particularly for smaller operators and new entrants. The 30% tax on net winnings, along with the introduction of TDS on all net winnings, could lead to increased operational costs and complexity for emerging platforms. However, these tax regulations also open up opportunities for larger, established players to consolidate their position in the market. As the industry matures, the taxation framework is likely to evolve, potentially offering tax incentives or differentiation between skill-based and chance-based games.

FAQs

Q1. What is the tax rate on online gaming winnings in India?

The tax rate on online gaming winnings in India is 30% on the net winnings from online gaming activities. This tax rate applies under Section 115BBJ of the Income Tax Act, 1961, and is applicable to all players, regardless of their total income or the nature of the game. This is a flat rate that overrides the usual income tax slabs, meaning that no exemptions or deductions are available on these winnings.

Q2. How is the TDS on online gaming calculated?

TDS (Tax Deducted at Source) on online gaming winnings is calculated as 30% of the net winnings. This deduction is applied either at the time of withdrawal or at the end of the financial year, whichever comes first. The TDS amount is deducted by the gaming platform before the winnings are disbursed to the player. The net winnings are calculated as the total amount withdrawn minus any previous deposits or the opening balance in the player's account at the start of the financial year.

Q3. Is there any threshold for TDS on online gaming winnings?

Under the current tax provisions, there is no minimum threshold for TDS on online gaming winnings. This means that regardless of the size of the winnings, TDS will be deducted on all net winnings. In previous provisions, a threshold of ₹10,000 existed, meaning TDS applied only if the winnings exceeded this amount. However, the new provisions, effective from April 2023, mandate that TDS be deducted on all net winnings, irrespective of the amount.

Q4. Can online gaming players claim deductions for entry fees or subscription charges?

No, players cannot claim any deductions for entry fees, subscription charges, or any other expenses related to their online gaming activities under the current tax rules. These expenses, including fees for participating in games, are not deductible against the taxable winnings. The tax is calculated purely on the net winnings (the amount after deposits and opening balances) and does not account for any operational costs incurred by the player during the gaming process.

Q5. How do I report online gaming income in my ITR?

Players need to report their online gaming income under the section "Income from Other Sources" in the Income Tax Return (ITR) form. This includes both the gross winnings and the TDS that has already been deducted by the gaming platform. It is important to correctly report the TDS as tax paid, as this will be adjusted against the player's total tax liability when they file their return. If the TDS deducted exceeds the total tax due, the player may be eligible for a refund.

Q6. Are losses from online gaming allowed to be set off against other income?

No, losses from online gaming cannot be set off against any other type of income, such as salary or business income. Under the Income Tax Act, losses from gambling or wagering activities, including online gaming, are not allowed to be set off against other taxable income. The losses cannot be carried forward to future years either.

Q7. What is the GST rate on online gaming in India?

Online gaming platforms in India are required to pay 28% GST on the total value of bets placed by players, both for skill-based and chance-based games. This high GST rate is imposed on the gross value of wagers, and not just on the winnings, which means gaming platforms must pay GST on the total bets, regardless of whether the player wins or loses. This contributes to higher operating costs for platforms, which could, in turn, increase costs for players.

Q8. Do non-residents pay the same tax rate on online gaming winnings?

Yes, non-resident players are subject to the same 30% tax rate on their winnings from online gaming in India. This is in line with India’s taxation of non-resident income, which taxes foreign individuals on their earnings sourced from India. TDS will be deducted at the same rate, and non-residents will need to report their earnings in their Indian income tax return and can claim the TDS credit.

Q9. Can online gaming platforms deduct TDS on behalf of players?

Yes, online gaming platforms are required to deduct TDS on behalf of players. The platforms must calculate the net winnings of each player and deduct 30% TDS at the time of withdrawal or at the end of the financial year. The platforms are then responsible for remitting the deducted tax to the government. Players receive the winnings after TDS has been deducted, and the platforms provide the necessary TDS certificates for players to use when filing their income tax returns.

Q10. What is the role of KYC in online gaming taxation?

KYC (Know Your Customer) is a critical requirement for both players and platforms in the online gaming sector. Players must complete KYC verification to ensure their PAN details and identity are correctly recorded. This helps the platforms correctly apply TDS and report the player's winnings to the tax authorities. Without KYC, the platform might not be able to properly deduct TDS or issue a TDS certificate, making tax compliance difficult for players.

Q11. How does the 30% tax rate on online gaming affect small players?

The 30% tax rate on online gaming can have a significant impact on small players, as even modest winnings will be taxed at the full rate. Players who win smaller amounts may find that a large portion of their winnings is deducted as tax, leaving them with less than expected. This tax burden can be particularly difficult for casual players who win small prizes regularly but are not generating significant earnings overall. Additionally, the TDS deduction at the time of withdrawal may limit the amount small players actually receive, affecting their experience with online gaming platforms.

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