International Tax Panorama

From 1st April 2023, for online gaming platforms like Dream11, Rummy Circle or Mycircle11 , a tax of 30% will be levied on net winnings, even if the winning is under Rs 10,000.

Earlier Companies used to keep winnings below Rs. 10,000 in order to evade taxes.

As per the new TDS (Tax deducted at source) law, TDS will be deducted at 30% of customer’s net winnings at the time of withdrawal. 

Net winnings are defined as the difference between your gains and spends.

Net winnings* = Winnings – (Total Entry amount – Discount/ Cash Bonus)

*subject to change as per the rules that are to be notified under the Income Tax 1961

E.g. If entry amount = Rs. 100 (Rs. 75 from deposits & Rs. 25 from cash bonus) & winnings = Rs. 1000, then,

– Net Winnings = 1000 – (100-25) = Rs. 925

– On withdrawal of Rs. 925, 30% TDS = Rs. 277.5

– Amount credited to bank account = Rs. 647.5

Legal Provisions for TDS on Online Gaming: 

These proposals were made in the Finance Bill 2023, which was released after the budget presentation by finance minister Nirmala Sitharaman. 

The proposal to levy 30% income tax on net winnings from online games and define gaming was made in Section 115BBJ, which was added to the Finance Bill and will come into effect from 1 April 2023.  

Sitharaman in her budget speech also proposed to do away with the minimum threshold of ₹10,000 for levying TDS on winnings from online gaming. This means TDS will be charged even if the winning is under ₹10,000. 

Legality of Online Gaming Industry:

These Online Gaming Industry is perfectly legal and has been distinguished from betting and gambling, through a new section 194BA which taxes a user’s net winnings from online games at the end of the financial year. 

Although the online gaming industry in India has maintained that the games offered on real money gaming and fantasy sports platforms such as MPL and Dream11 are games of skill and are recognised by various high courts in India, they are still banned in some parts of India.