In Union Budget 2023, Finance Minister Nirmala Sitharaman announced a 30% tax on “net winnings” from online games. To further clarify the tax policy, she told the abolition of the minimum threshold limit of Rs 10,000 for calculating tax deductions at source (TDS).

A 30% tax must be paid when winnings are withdrawn or at the end of the financial year. Additionally, TDS will apply to winnings, and the ultimate responsibility for the tax will rest with those responsible for paying winnings.

Two new sections were added to the Income Tax Act to incorporate these changes. These are 194BA for TDS on online gaming winnings from online intermediaries and 115BBJ for calculating taxes on people who receive income from online gaming.

Gaming platforms and experts welcomed the move, saying it would increase transparency in the industry.

“We applaud the significant steps taken by the government to rationalise direct taxation in the online gaming industry. Amendments to sections 194B and 115BB of the Income Tax Act 1961 stipulate that TDS should be calculated based on net winnings, thereby allowing offsetting of losses, which is a move towards the correct direction,” said Sameer Barde, CEO of the Electronic Gaming Federation (EGF).

The centre also distinguished between “games of skill” and “games of chance” in the fiscal bill, suggesting that the two may have different tax structures in the future.

However, the industry is now expecting clarification on the Goods and Services Tax (GST) policy for the industry.

The IT Ministry recently proposed regulation of online gaming and planned to formalise a structure. It has been operating since the centre established an inter-ministerial working group to oversee the industry. According to reports, the GST Council is also working on rules to clarify the impact of the GST on the industry.

In the budget, FM Sitharaman announced 100 new laboratories to develop 5G applications in India. She also lowered import duties on mobile phone components.

Experts say these will improve the efficiency and affordability of the game.