These provisions were effective from April 1, 2023.
The TDS obligation is applicable even in cases where the players do not make any deposit to participate in the game. Online gaming companies are required to withhold tax at TDS as 30% of winnings at the end of the financial year or at the time of withdrawal. ‘Online game’ was widely defined to mean a game that is offered on the internet and is accessible by a user through a computer resource, including any telecommunication device and therefore is made applicable to games of skill or games of chance. A new provision as section 115BBJ was introduced in the Income-tax Act, 1961 (“ ITA”) to provide for 30% tax on net winnings from ‘online games’. The new provisions implemented a distinction between the taxation of online and offline games.
The Finance Act, 2023 overhauled the direct tax regime on income arising from online games.
