Income Tax Bill 2025: Defines Online Gaming and Updates Tax Rules on Winnings

The Income Tax Bill 2025, scheduled to be introduced in Parliament on February 13, aims to bring greater clarity to the taxation of online gaming winnings by introducing a well-defined framework and updated tax provisions. Unlike the Income Tax Act of 1961, which categorized online gaming alongside lotteries and gambling, the new bill establishes a distinct definition for ‘online game’ and introduces a more structured approach to taxation, aligning with the sector’s growing significance in India.

According to tax experts, these changes will provide much-needed certainty in the taxation of digital gaming, ensuring that income from this sector is taxed appropriately.

Under the existing Income Tax Act, winnings from online gaming are taxed at a flat 30 percent, with Tax Deducted at Source ( TDS ) applicable when winnings exceed Rs 10,000 per transaction. However, the lack of a specific definition for online gaming has created ambiguity.

The proposed bill defines an ‘online game’  means a game that is offered on the internet and is accessible by a user through a computer resource including any telecommunication device.

This new framework introduces a taxation model based on net winnings, which considers deductions for entry fees or wagers, making tax calculations more equitable.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

TDS Regulations

The bill maintains the Rs 10,000 threshold for TDS but specifies that the deduction applies only to net winnings exceeding this amount in a single transaction. Gaming platforms and intermediaries will be responsible for deducting and depositing the TDS when crediting winnings to a player’s account or making payments.

To ensure consistent taxation, the bill explicitly disallows any deductions for expenses or allowances when computing taxable winnings. Additionally, losses from online gaming cannot be offset against other income or carried forward to future financial years. This measure ensures that all gaming earnings are taxed in full, without any reductions due to prior losses.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

By introducing a structured tax framework for online gaming, the new bill aims to enhance transparency in the sector while ensuring the government collects appropriate revenue from digital gaming activities.

To Read the full text of the Tax Bill CLICK HERE

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