TDS to be deducted on all online game winnings announced in Budget 2023

TDS threshold for online gaming has been removed from Rs 10,000 to nil in Budget 2023. As per the announcement, "Removing the minimum threshold of Rs 10,000/- for TDS and clarifying taxability relating to online gaming."

As per current income tax laws, TDS is applicable on the winnings made from online gaming. Further, winnings are required to be reported under the head 'Income from other sources' while filing income tax return (ITR).

TDS becomes applicable if the winnings made from each online game exceeds Rs 10,000. Further, TDS on winnings is deducted at 30 per cent.


Here is an example to understand this. Suppose an individual paid an entry free of Rs 1,000 and won Rs 36,000. Then, online gaming company would deduct TDS on Rs 35,000 (Rs 36,000 less of Rs 1000). The tax of Rs 10,500 (Rs 35,000*30%) would be deposited to the government and balance Rs 24,500 would be credited to the individual account.

Similarly, if an individual has won Rs 9,500 instead of Rs 36,000 in the example above, then no tax would be deducted on the winnings.

Do note that irrespective of whether TDS is deducted or not from online gaming winnings, one is required to report them in their income tax return and pay income tax accordingly. The winnings from online mobile games are taxed under the head 'Income from other sources'.

Under this head, income is taxed at the income tax rate applicable to their income slab. For instance, an individual opting for the old income tax regime and has net taxable income of Rs 8 lakh, then tax rate of 20% would be applicable.

On the other hand, if he/she opts for the new income tax regime, then net taxable income of Rs 8 lakh will be taxed at 15%.

Do note that one can claim deduction and exemptions in old income tax regime. The same is not permitted in the new income tax regime.