The new Income-Tax Bill, 2025, likely to be introduced in Parliament on February 13, is expected to provide a clearer definition for online games, tax experts said.
Unlike the Income Tax Act, 1961, which grouped online gaming under lotteries and gambling, the new bill distinctly defines 'online game' and streamlines the tax treatment, to reflect growing prominence of digital gaming in India.
The bill will bring much-needed clarity to the tax landscape for online gaming and ensure that income from this sector is taxed appropriately, said tax experts.
The Income Tax Act, 1961, taxed winnings from online gaming at 30 percent with TDS (Tax Deducted at Source) applicable on amounts exceeding Rs 10,000 per transaction. However, there was lack of a clear definition of online gaming.
The new tax bill defines 'online game' as any game offered on the internet and accessible through a computer or telecom device. The new framework focuses on net winnings, calculated after adjusting for entry fee or bets, ensuring fairer tax treatment.
TDS Provisions
The new bill retains the Rs 10,000 threshold for TDS on net winnings from online games. TDS will be deducted only if the net winnings exceed Rs 10,000 in a single transaction. Online gaming companies or intermediaries will be responsible for deducting and depositing TDS at the time of crediting the winnings into the player’s account, or during payment.
The bill prohibits any deduction for expenses or allowances while calculating income from online gaming winnings. Losses from online gaming cannot be set off against other income, or carried forward to subsequent years, ensuring that all winnings are taxed in full.
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