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Winnings from online games to be taxed at flat 30%, on par with cryptos, proposes Budget 2023

Feb 1, 2023

Current income tax laws mandate that these winnings are taxed according to the income tax slab applicable to the income of the individual.

Budget 2023 has proposed taxing winnings from online games at a flat 30%. According to the current income tax laws, these winnings are taxed as per the income tax slab applicable to the income of the individual concerned.

According to the Budget 2023 memorandum, “(viii) to amend section 115BB of the Act to exclude income from winnings from online games from the purview of the said section from the assessment year 2024-25, since it is proposed to introduce section 115BBJ to tax winnings from online games from that assessment year;

(ix) to insert a new section 115BBJ in the Act with regard to tax on winnings from online games to provide that where the total income of an assessee includes any income by way of winnings from any online game, the income-tax payable shall be the aggregate of—

• The amount of income-tax calculated on net winnings from such online games during the previous year, computed in the prescribed manner, at the rate of thirty percent; and

• The amount of income-tax with which the assessee would have been chargeable had his total income been reduced by the net winnings referred to above;”

The new laws will come into force from April 1, 2023, after they are passed by Parliament.

Union Budget 2022 had introduced a 30% tax on gains from cryptocurrencies.

Budget 2023's memorandum further states that the government will prescribe the method for calculating winnings from online games for income tax purposes.
Note that earnings from online gaming must be reported in an income tax return and the tax must be paid on them whether or not TDS is deducted. The winnings from online mobile games are taxed under the head "income from other sources".

Income is taxed under the heading at the rate determined by taxpayer’s income bracket. For instance, if a person chooses the old income tax system and has a net taxable income of Rs 8 lakh, a 20% tax rate would be applied. But if they choose the new income tax system, then at their net taxable income of Rs 8 lakh, they will be subject to a 15% tax rate.
Under the previous income tax system, one could claim exemptions and deductions. In the new income tax structure, these are prohibited.

[The Economic Times]

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