Government Directs Online Gaming Companies to Deduct Tax at Source if Players Claim Their Winnings

Online gaming companies will be required to deduct taxes at source if players claim their net winnings, including bonuses or incentives, according to guidelines issued by the Central Board of Direct Taxes.

However, bonuses or incentives will not be taxed if they are not claimed or withdrawn, the agency said.

Net winnings will be calculated by subtracting the amount withdrawn by a customer from the sum total of deposits in the account and opening balance at the beginning of the year.

The net winnings of a player on online gaming platforms are currently taxed at 30 percent.

Online gaming companies will not be required to deduct taxes on winnings withdrawn by a player if the amount is less than Rs. 100 ($1.22) a month.

Back in December 2022, it was reported that a panel of state finance ministers were yet to submit its report on taxation of the booming online gaming sector which is crucial to a final decision on how the levies should be imposed.

The panel deliberated for weeks on how it should tax online gaming companies — and whether federal tax should be imposed on only the profits of firms or on the value of the entire pool of money collected from participants.

At the time, officials said the panel was unlikely to reach a consensus in December.

Real-money online games have become hugely popular in the country, prompting foreign investors like Tiger Global and Sequoia Capital to back local gaming startups Dream11 and Mobile Premier League, popular for their fantasy cricket games.  

© Thomson Reuters 2023