Online gaming winnings are taxed differently from ordinary income. The law taxes net winnings, requires tax deduction at source (TDS) without a monetary threshold, and restricts deductions against the winnings.
Do not mix the two filing periods
Tax rate on online gaming winnings
For FY 2025-26, section 115BBJ taxes net winnings from online games at 30%. Surcharge, where applicable, and health and education cess at 4% are added while calculating the final tax liability. The 30% rate applies irrespective of the taxpayer's normal slab rate.
Under the Income-tax Act, 2025, the corresponding special-rate provision is section 194(1), Table Sl. No. 5. The 30% rate continues for Tax Year 2026-27.
| Subject | Income-tax Act, 1961 | Income-tax Act, 2025 | Position |
|---|---|---|---|
| Tax on net online-game winnings | Section 115BBJ | Section 194(1), Table Sl. No. 5 | 30% special rate continues |
| TDS on online-game winnings | Section 194BA read with Rule 133 | Section 393, Table for payments to any person, Sl. No. 2, read with applicable 2026 Rules | Deduction on net winnings at withdrawal and year-end |
| Restriction on expenses | Section 58(4) | Section 94(4) | No expenditure or allowance against winnings |
When is TDS deducted?
The online-gaming intermediary must deduct TDS at 30% on net winnings:
- when the user withdraws money or winnings from the user account; and
- at the end of the financial year or tax year on the remaining net winnings that have not already suffered TDS.
There is no minimum threshold for TDS under section 194BA. If winnings are wholly or partly in kind, or the cash component is insufficient, the payer must ensure that the tax has been paid before releasing the winnings.
How are net winnings calculated?
Rule 133 prescribes the calculation for FY 2025-26. In broad terms, genuine deposits and opening balances are excluded, while withdrawals and the closing user-account balance are considered after adjusting amounts already subjected to tax. Transfers between wallets maintained with the same intermediary are dealt with under the prescribed rules.
Simple illustration
Can losses, entry fees or other expenses be deducted?
No deduction for expenditure or allowance connected with online-game winnings is permitted. A loss on one platform or game cannot ordinarily be used to reduce taxable net winnings computed under the statutory user-account formula on another platform.
How to report online gaming winnings in the ITR
- Report the gross taxable net winnings under Schedule OS—Income from Other Sources.
- Ensure the amount appears under the special-rate income taxable under section 115BBJ in Schedule SI.
- Claim TDS in the relevant TDS schedule using the gaming intermediary's TAN and certificate details.
- Reconcile the figures with Form 26AS, AIS, Form 16A and the platform's annual transaction or tax statement.
ITR-1 and ITR-4 are not suitable where the taxpayer has income taxable at the special rate applicable to online-game winnings. The correct form will generally be ITR-2 or ITR-3 depending on whether business or professional income is also present.
Important
Common mistakes
- Reporting only the amount received after TDS instead of the taxable gross net winnings.
- Treating TDS as the final tax without considering cess, surcharge or other income.
- Claiming gaming deposits, platform charges or losses as deductions.
- Ignoring the year-end TDS entry on unwithdrawn winnings.
- Claiming credit that does not appear in Form 26AS without first reconciling it with the intermediary.
Conclusion
Online-game winnings are subject to a separate 30% tax and TDS framework. Maintain platform-wise deposits, withdrawals, balances and TDS certificates, and report the statutory net winnings rather than the net cash received.
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