Income Tax Bill 2025 to redefine taxation on online gaming
What's the story
The new Income Tax Bill should be introduced in the Parliament tomorrow.
The proposed legislation seeks to define and tax online gaming winnings, a major shift from the erstwhile Income Tax Act of 1961.
The current law treats online gaming as lotteries and gambling, whereas the new bill aims to specifically define 'online game' and simplify its taxation.
Modernization
Modernizing tax treatment of e-gaming
The upcoming Income Tax Bill is intended to mirror the growing prominence of online gaming in India.
It seeks to provide much-required clarity to the tax landscape for the sector and ensure that income from it is taxed appropriately.
The current law taxes winnings from online gaming at 30% with TDS (Tax Deducted at Source) on amounts exceeding ₹10,000 per transaction. However, it doesn't clearly define online gaming.
Clarity
Clear definition of 'online game'
The new tax bill defines an 'online game' as any game offered on the internet and accessible via a computer/telecom device.
This updated framework focuses on net winnings, calculated after adjusting for entry fee or bets.
It aims to ensure fairer tax treatment for players and companies involved in online gaming.
The ₹10,000 threshold for TDS on net winnings from these games remains unchanged under this proposed legislation.
Responsibility
Gaming companies to handle TDS under new bill
Under the proposed bill, online gaming companies/intermediaries will deduct and deposit TDS.
This will be done when the net winnings exceed ₹10,000 in a single transaction and at the time of crediting the winnings into the player's account or during payment.
The bill also prohibits any deduction for expenses or allowances while calculating income from online gaming winnings.
Full taxation
Full taxation of online gaming winnings
Finally, Income Tax Bill 2025 also states that losses from e-gaming cannot be set off against other income or carried forward to subsequent years. This is to ensure that all winnings are taxed in full, giving a holistic approach to taxation of this fast-growing sector.