In the Finance Bill 2023, a new TDS section, 194BA, and 115BBJ, have been inserted into the Income Tax Act, and they have been made applicable from 01.04.2023.



Eligibility criteria for the tax deductor:

Any person (resident or non-resident) responsible for paying any income by way of winnings from any online game to any person (resident or non-resident) during the financial year shall deduct TDS on the net winnings in their user account, computed as prescribed, at the end of the financial year at the prevailing rates.




The following definitions apply for the purposes of this provision:


  • “Computer resource,” “Internet,” and “Online game” shall have the meanings assigned to them in this section.


  • “Online gaming intermediary” means an intermediary that offers one or more online games.


  • “User” means any person who accesses or avails of any computer resource of an online gaming intermediary.


  • “User account” means the account of a user registered with an online gaming intermediary.



Amount of Deduction:

TDS is calculated on the net winnings from online gaming during the previous year at the rate of 30%, and additionally, as per section 115BBJ, income tax is calculated on the net winnings at the rate of 30%. There is no threshold limit on the amount, and the tax will be deducted from the entire net winning amount.



Certain conditions for tax deduction:

If there is a withdrawal from the user account during the financial year, TDS shall be deducted at the time of such withdrawal on the net winnings included in the withdrawal, as well as on the remaining amount of net winnings in the user account, computed as prescribed, at the end of the financial year. In cases where the net winnings are wholly in kind or partly cash and partly in kind, but the cash part is insufficient to meet the tax deduction liability for the entire net winnings, the person responsible for paying shall ensure that tax has been paid before releasing the winnings.



Section 194BA is applicable in various scenarios.

Example: Suppose you paid an entry fee of Rs. 10,000/- and won Rs. 1,00,000/-. The online gaming company would deduct TDS on Rs. 90,000/- (Rs. 1,00,000 – Rs. 10,000). The tax of Rs. 27,000/- (Rs. 90,000 * 30%) would be deposited to the government, and the remaining Rs. 63,000/- would be credited to your individual account. If you do not withdraw the winning amount, TDS will be deducted and deposited to the government at the end of the financial year.




The introduction of Section 194BA and 115BBJ in the Income Tax Act aims to regulate the taxation of winnings from online games. With the increasing popularity of online gaming and the rise of virtual economies, the government seeks to ensure that appropriate taxes are paid on such income.



This new provision places the responsibility of deducting TDS on the person making the payment of winnings. It applies to both residents and non-residents involved in online gaming transactions. The TDS is calculated at a rate of 30% on the net winnings, and income tax is also levied at the same rate under section 115BBJ.







To determine the net winnings, the computation method prescribed by the government is followed. The tax deductor must deduct TDS on the net winning amount and deposit it with the government. There is no threshold limit, meaning that TDS will be applicable to the entire net winning amount.


Withdrawals from the user account during the financial year trigger TDS deductions on the net winnings