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Budget 2023 removed the minimum threshold of Rs 10,000 for tax imposed on winnings from online gaming. According to the revised rules, all winnings will now be taxed—either at the time of winning or at the end of the financial year—at 30%. This would apply to platforms that offer real money winnings.

Earlier, the TDS (tax deducted at source) was charged on each winning, and the finance ministry said that the threshold allowed many online gaming platforms to keep their winnings just shy of Rs 10,000.

“The taxation will be on net winnings because people usually play games a series of online games,” Finance Minister Nirmala Sitharaman clarified at the press conference after the budget.

The emerging online gaming industry has been swirling in regulations and altering taxation policies for quite some time. In the Draft Rule for Online Gaming, released in January by the Ministry of Electronics and IT (MeitY), platforms had to set up a mandatory know-your-customer (KYC) norms for verification, a self-regulatory body, and a grievance redressal mechanism.

“Now that the TDS threshold of Rs 10,000 has been removed for income from online gaming, all money withdrawn will be subject to TDS from here onwards. This will adversely affect online gaming startups as it would increase the cost of compliance for them,” said Siddharth Pai, Founding Partner, 3one4 Capital.

Roland Landers, CEO of All India Gaming Federation, welcomed the move as it rationalised direct taxation for online gaming platforms. “We are happy to note that the Finance Bill carves out the distinction between betting and gambling activities and online games, through introducing a new section 194BA, which taxes a user’s net winnings from online games at the end of the financial year,” he said.

“While we await CBDT’s (Central Bureau of Direct Taxes) clarifications and guidelines in this regard, we are hopeful that the certainty in taxation offered by the budget announcement will be a huge stimulus for the growth of the online gaming industry,” he added.