The rise of online gaming as a taxable revenue source The Indian gaming industry has seen a boom with real-money games of luck, e-sport tournaments, and fantasy sports leagues all promising fat cash awards. As the punters get their winnings, however, one should not overlook the fact that these winnings are taxable. The Income Tax Department has intensified its efforts to chase down winning sums related to gaming by two-fold in FY25, and it is now important for players to note their tax compliance. Non-compliance could draw penalties, interest, or even legal action.
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Understanding how online gaming revenue is taxed Online gaming revenue is taxed at a fixed rate of 30% with cess and surcharge under Section 115BB of the Income Tax Act irrespective of the player's slab of income. Such income is taxed on the revenue arising from games of chance as well as on games of skill. Notably, no expense or allowance deductions are allowed against such revenue. The amount paid is considered to be net of TDS deducted at source and as such gaming sites are liable to deduct TDS before crediting your winnings into your account.
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TDS laws for FY25 and compliance With effect from FY25, TDS on winnings under online games is to be payable under Section 194BA. If your net winnings in a financial year exceed ₹100, the site is obligated to deduct TDS at 30% on withdrawal or at the end of the financial year, whichever comes first. Even when you do not withdraw your winnings, year-end TDS may also occur. The players must have Form 16A from the site to report this income in their IT returns in the proper form.
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Choosing of the right ITR form and reporting the success Online gaming income is reported under the head “Income from Other Sources” in your Income Tax Return. For individuals, ITR-2 is generally applicable if there is no business income, while ITR-3 may apply if gaming is your profession. You’ll need to declare the gross amount of winnings, the TDS deducted, and ensure that all figures match the details in your Annual Information Statement (AIS) to avoid mismatch notices from the tax department.
Keeping records audit-ready For easy filing of tax, keep proper records of your gaming victories — date of victory, size of victory, platform information, and evidence of TDS withholding. Though no deductions are allowable against victories, keeping proper record shall come in handy in case of any dispute or verification. When tax authorities shift to online operations, discrepancies between your game platform reports and returns filed may invite an audit. Keeping them simplified and structured is the best bet.
