Section 194BA — TDS on Online Games: A Complete and Updated Guide (2025-26)

What Is Section 194BA?

Section 194BA was introduced by the Finance Act, 2023, and became effective from 1 April 2023. It is the provision under the Income Tax Act, 1961, that deals specifically with Tax Deducted at Source (TDS) on winnings from online games.

Before this section existed, online gaming income was covered under the broader Section 194B, which handled TDS on lotteries, card games, and other games of any sort. The problem with using Section 194B for online gaming was that it only applied when winnings from a single transaction exceeded Rs. 10,000. Platforms and players could sometimes work around this by splitting payouts. Section 194BA was introduced to fix exactly that loophole.

Under Section 194BA:

•       TDS is deducted at 30% on net winnings from any online game
•       There is no minimum threshold — not Rs. 10,000, not Rs. 1,000, not even Rs. 100. The rule applies on every rupee of net winnings
•       The person responsible for deducting TDS is the online gaming intermediary — the platform itself
•       TDS is deducted either at the time of withdrawal from the gaming account, or at the end of the financial year on any remaining balance, whichever comes first

The charging section for the actual income tax liability is Section 115BBJ, which taxes net winnings from online games at a flat 30% (plus 4% cess, making it 31.2%). Section 194BA is the TDS mechanism — the upfront deduction — while Section 115BBJ governs the final tax liability when you file your ITR. 

What Counts as an Online Game Under Section 194BA?

The definition is fairly broad. CBDT Circular No. 5/2023, issued on 22 May 2023, defines an online game as any game that:

•       Is played on the internet
•       Requires the user to deposit money or currency to participate
•       Allows the winnings to be withdrawn

This covers real-money gaming apps, skill-based games, card games like rummy and poker, fantasy sports platforms, online quiz contests with prizes, online lottery platforms, and e-sports with cash rewards. It does not matter whether the game is primarily based on skill or chance — the same TDS rules apply to both.

The definition also specifically includes winnings in kind, not just cash. If a platform gives you vouchers, coins, merchandise, or any other non-cash reward, it is still taxable at its fair market value. The platform must ensure TDS is paid on the value before releasing the prize. 

For a broader understanding of how lotteries, horse racing, casino winnings, and offline gambling are taxed alongside online gaming, read our complete guide on tax on gambling winnings in India

TDS Rate and When It Is Deducted

The TDS rate under Section 194BA is 30%. There is no surcharge or education cess at the TDS stage — those come into the picture only when you file your final ITR and compute your actual tax liability.

The timing of TDS deduction matters and works like this:

1.   At the time of each withdrawal: When you withdraw money from your gaming account to your bank, TDS is calculated on the net winnings component of that withdrawal. The platform deducts 30% of the net winning portion and pays the balance to you.
2.   At year-end on the remaining balance: At 31 March (end of financial year), the platform computes the net winnings remaining in your account that have not yet been subject to TDS, and deducts 30% on that amount before the year closes.

One practical point: if your gaming account does not have enough cash balance to cover the TDS on a year-end deduction, the platform has the option to pay the difference itself, and you then owe that amount to the platform. The platform cannot simply not deduct TDS because your balance is insufficient.

There is one small relaxation for low-value accounts: if the net winnings in a withdrawal do not exceed Rs. 100 in a month, TDS can be deferred. But this is only a timing relief — the TDS must still be deducted when the cumulative amount crosses Rs. 100 in the same or a later month, or at year-end if never withdrawn.

 How Net Winnings Are Calculated for TDS Deduction

This is the part that confuses most people, and understandably so. The concept of “net winnings” under Section 194BA is not simply the amount of money you took out of the platform. It accounts for your deposits, your opening balance, and your closing balance. The idea is to tax only the genuine profit — not the money you put in yourself.

The formula is set out in Rule 133 of the Income Tax Rules, 1962 (notified via Notification No. 28/2023, dated 22 May 2023):

Net Winnings = (Amount Withdrawn + Closing Balance) minus (Opening Balance + Deposits Made During the Year)

Let us break down each component:

•       Amount Withdrawn (A): The total amount the player withdraws from the gaming account to their bank account during the financial year.
•       Closing Balance (D): The balance remaining in the gaming account at 31 March, excluding any non-withdrawable bonuses or promotional credits.
•       Opening Balance (C): The balance in the gaming account at the start of the financial year (1 April), excluding non-withdrawable bonuses.
•       Deposits Made (B): The total amount deposited by the player from their bank account into the gaming account during the year. These are called “non-taxable deposits” because they represent money the player already earned and paid tax on elsewhere.

In plain words: you are taxed on what you end up with (withdrawals plus remaining balance) after subtracting what you started with (opening balance) and what you added yourself (deposits). That difference is your actual profit from gaming, and that is what gets taxed.

One important clarification from the CBDT: bonuses, referral bonuses, and incentives given by the platform are treated as taxable deposits, not as non-taxable deposits. So if the platform gives you Rs. 500 as a welcome bonus, that amount is included in the taxable deposit pool — meaning it is not subtracted when computing net winnings. Only the money you brought in from your own bank account reduces the taxable base.

A Step-by-Step Worked Example

Let us say Ravi opens a gaming account on 1 April 2025 with Rs. 0 balance.

•       Opening balance (C): Rs. 0
•       Deposits from bank (non-taxable) during the year: Rs. 30,000
•       Platform welcome bonus (taxable deposit): Rs. 500
•       Total in account at some point: Rs. 30,500

During the year, Ravi plays and his account grows. He withdraws Rs. 20,000 in August 2025. At 31 March 2026, his remaining balance is Rs. 18,000.

•       Amount Withdrawn (A): Rs. 20,000
•       Closing Balance (D): Rs. 18,000
•       Opening Balance (C): Rs. 0
•       Non-taxable Deposits (B): Rs. 30,000

Net Winnings = (Rs. 20,000 + Rs. 18,000) minus (Rs. 0 + Rs. 30,000)

Net Winnings = Rs. 38,000 minus Rs. 30,000 = Rs. 8,000

TDS at 30% on Rs. 8,000 = Rs. 2,400

The TDS of Rs. 2,400 is deducted by the platform — partly at the time of the August withdrawal and partly on the 31 March year-end balance computation.

Now suppose Ravi instead ended the year with a closing balance of Rs. 5,000. Net winnings would be (Rs. 20,000 + Rs. 5,000) minus Rs. 30,000 = negative Rs. 5,000. In this case, net winnings are zero. No TDS is deducted on the year-end balance. But Ravi cannot carry that Rs. 5,000 loss forward or set it off against any other income.

When Net Winnings Are Negative: No Loss Deduction

This is important enough to call out separately. If a player ends up losing money overall — their net winnings formula results in a negative figure — there is no tax. That is the good part.

The bad part is that losses in online gaming cannot be used to reduce your other income. You cannot set off gaming losses against your salary, business income, capital gains, or anything else. You cannot carry them forward to the next year either. The income tax law is explicit about this under Section 58(4): no deduction is allowed for any expenditure or loss related to income from online games, lotteries, gambling, or betting.

What this means in practice: if you win Rs. 50,000 in a good month and then lose Rs. 60,000 in a bad month on the same platform, the net winnings formula across the full year accounts for both. But if you win on Platform A and lose on Platform B, the losses on Platform B cannot reduce the taxable winnings from Platform A. Each platform computes net winnings for its own accounts independently.

 New Income Tax Act 2025: Section Reference for Online Gaming TDS

India passed a new Income Tax Act in 2025, which came into force on 1 April 2026. This replaced the Income Tax Act, 1961, which had governed taxpayers for over 64 years. The 1961 Act had grown very complex over decades of amendments — over 4,000 amendments in total — and the government decided it needed a clean replacement.

The new Act does not introduce any new taxes. The rates, thresholds, and fundamental rules are unchanged. What changed is the structure, language, and section numbering.

Under the new Income Tax Act, 2025, all non-salary TDS provisions that were previously scattered across 40+ individual sections (the entire 194-series) have been consolidated into a single section: Section 393. This includes:

•       Old Section 194C (contractor payments) — now under Section 393
•       Old Section 194J (professional fees) — now under Section 393
•       Old Section 194BA (online gaming TDS) — now under Section 393(3)
•       Old Section 194B (lottery, gambling TDS) — now under Section 393

Section 393(3) specifically covers winnings from online games. The rate remains 30% on net winnings, and there is still no threshold. The manner of computing net winnings under Rule 133 continues to apply. The online gaming intermediary is still the one responsible for deducting TDS.

For TDS challans and TDS returns filed from 1 April 2026 onwards, the system uses numeric payment codes (in the range 1001 to 1067) instead of section numbers. Gaming intermediaries and their compliance teams need to update their software and filing processes to use the correct code for online gaming TDS under the new regime.

What This Means for Players

If you are a regular player, the practical impact on you is minimal. The tax deducted on your winnings is still 30%. Your gaming platform still issues a TDS certificate (now under the new form numbers under the Income Tax Rules, 2026). You still report gaming income under “Income from Other Sources” in your ITR.

The main thing to be aware of: for FY 2025-26 (returns filed by September 2026), you continue to use old section references in your ITR. For Tax Year 2026-27 (returns filed from July 2027 onwards), the new section numbers and terminology apply. The income tax department has said both the old and new systems will be available on the e-filing portal concurrently during the transition.

A Quick Mapping Table

What It Covers	Old Section (IT Act 1961)	New Section (IT Act 2025)
TDS on online gaming winnings	Section 194BA	Section 393(3)
TDS on lottery / gambling winnings	Section 194B	Section 393
Tax on online gaming income	Section 115BBJ	Equivalent under IT Act 2025
Tax on lottery / gambling income	Section 115BB	Equivalent under IT Act 2025

 Fantasy Sports (Dream11, MPL): TDS Applicability

Fantasy sports were at the center of a years-long debate in India about whether they count as games of skill or games of chance. That debate had major legal implications — games of skill were broadly legal across most states, while gambling was restricted or prohibited.

From a tax perspective under Section 194BA, that debate became irrelevant. The section makes no distinction between skill-based games and chance-based games. Both are treated identically for TDS purposes. If you play Dream11, MPL, or any other fantasy platform where you deposit real money and can withdraw winnings, the same 30% TDS on net winnings applies.

From a legal standpoint, the Supreme Court of India — through multiple rulings involving Dream11 — had consistently held that fantasy sports are games of skill and are therefore legal business activities. Nine Supreme Court judges considered the question across various petitions and upheld the skill-based classification.

The 2025 Regulatory Shift

This legal landscape changed significantly in August 2025. The central government passed the Promotion and Regulation of Online Gaming Act, 2025. This law banned all online real-money gaming in India — including fantasy sports with entry fees — irrespective of whether the game was skill-based or chance-based. The traditional skill-versus-chance distinction, which courts had relied on for decades, was effectively removed by the new legislation.

Dream11 stopped all paid contests from around 22 August 2025. The platform shifted to offering only free-to-play contests. MPL and other platforms faced the same restrictions. The gaming industry immediately challenged the new law in court, arguing that it exceeded central government powers (gambling is a state subject under the Constitution) and overturned decades of judicial precedent. Multiple High Courts stayed or questioned parts of the law. As of May 2026, the matter remained before the Supreme Court and a final verdict had not been delivered.

Tax Obligations for Past Fantasy Sports Winnings

If you played Dream11, MPL, or similar platforms before August 2025 and had net winnings during those periods, your tax obligations are clear:

•       The platform would have deducted TDS under Section 194BA at 30% on your net winnings at the time of each withdrawal and at the year-end balance
•       This TDS appears in your Annual Information Statement (AIS) on the income tax portal
•       You must report the gross net winnings (before TDS) in your ITR under “Income from Other Sources”
•       Claim the TDS as credit in Schedule TDS2 of your ITR
•       If the total tax on your net winnings at 30% equals or is less than the TDS already deducted, you get a refund. If more tax is owed (for example, due to surcharge on high incomes), you pay the difference

Not reporting gaming income in your ITR because “TDS was already deducted” is a common mistake. The ITR is your formal disclosure. The TDS is only an advance payment. You still need to report the income.

 GST on Online Gaming: The 28% Rate and Its Impact on Players

TDS and income tax are not the only taxes relevant to online gaming. There is also GST, and the GST regime for online gaming went through a major upheaval in October 2023 that is important to understand.

Before 1 October 2023, online gaming platforms were broadly paying 18% GST on their Gross Gaming Revenue (GGR) — essentially their platform fee or commission. There was also some differentiation between skill games (18%) and chance games (28%). This created ambiguity and litigation.

The October 2023 GST Change

In July 2023, the GST Council decided to impose 28% GST on the full face value of every player deposit on online gaming, casino, and horse racing platforms. This came into effect on 1 October 2023.

To understand the impact, consider this: if you deposit Rs. 1,000 on a gaming platform, the platform is now liable to pay Rs. 280 as GST to the government on that deposit. Previously, if the platform earned Rs. 100 as commission, only that Rs. 100 (or some portion of it) attracted GST. Under the new rule, the entire Rs. 1,000 deposit is the taxable amount, and 28% of it goes to GST.

This is a very significant shift. It means that even before you play a single game, a large portion of your deposit effectively goes towards a tax obligation that the platform has to settle. Platforms either absorb this cost or pass it on through reduced prize pools, higher entry fees, or other mechanisms. Either way, the player is indirectly affected.

The Supreme Court Challenge

Gaming companies challenged the 28% GST rate aggressively. The Directorate General of GST Intelligence issued show-cause notices totalling over Rs. 1.12 lakh crore to 71 gaming companies. This was because the authorities also sought to apply the 28% rate retrospectively — for the period before October 2023 — arguing that the nature of gaming had always been equivalent to gambling.

Companies, including Gameskraft, Dream11, and MPL, disputed this. They argued that:

•       The 28% rate is too high and should apply only to their platform fee, not the full deposit
•       Retrospective application is legally unjustified since the law only changed from 1 October 2023
•       Taxing the entire prize pool (which they merely hold in trust for players) as their income is incorrect

The Supreme Court consolidated all these cases into what is now known as the Gameskraft batch. After a marathon 31-day hearing, the Supreme Court reserved its judgement in August 2025. As of May 2026, the verdict was still pending. The 28% GST on full face value deposits remains in force for the October 2023 onwards period while the case continues.

GST vs Income Tax: Two Separate Things

It is worth being clear that GST and income tax TDS are completely separate obligations:

•       GST is paid by the gaming platform on your deposit. It is their tax liability, not yours directly (though you bear it indirectly through economics)
•       Income tax under Section 194BA / 393(3) is deducted from your net winnings. This is your tax liability, deducted by the platform on your behalf

Both taxes apply simultaneously. A player who deposits Rs. 1,000, wins Rs. 2,000 in net winnings, and withdraws everything in the same year will face: (a) Rs. 280 GST borne by the platform on the deposit, and (b) Rs. 600 TDS (30% of Rs. 2,000 net winnings) deducted from the withdrawal.

 How to Report Online Gaming Income in Your ITR

Once TDS has been deducted by the platform, your work is not done. You still need to file an ITR and correctly report the income.

First, the form. You cannot use ITR-1 for online gaming income. ITR-1 is only for salary, one house property, and limited other sources. Gaming winnings require ITR-2 (if no business income) or ITR-3 (if you also have business income).

In your ITR, go to the Schedule for “Income from Other Sources” (Schedule OS). Report the gross net winnings — the amount before TDS was deducted, not the amount actually received. The ITR utility has a dedicated field specifically for online gaming income under Section 115BBJ. This field only accepts positive numbers, which aligns with the rule that gaming losses cannot be carried forward or set off.

Next, go to Schedule TDS2 (for non-salary TDS). Enter the TDS details from your gaming platforms — the TAN of the platform, the amount deducted, and the certificate number. This allows you to claim credit for the TDS already paid.

The TDS deducted by gaming platforms appears in your Annual Information Statement (AIS) on the income tax portal, based on data sent directly from the gaming platforms to the income tax department. Before filing, check your AIS to make sure all TDS entries are correctly reflected.

 When Is Filing an ITR Mandatory for Gaming Income?

A common question is: what if my gaming winnings are small — do I still need to file?

Under Rule 12BA of the Income Tax Rules, ITR filing is mandatory if the aggregate TDS or TCS for the year exceeds Rs. 25,000. Since Section 194BA deducts TDS on every rupee of net winnings without any threshold, even moderate gaming activity can easily cross this limit.

More importantly: if you have net winnings at all from online gaming, those winnings are taxable income. Taxable income must be reported. The only question is whether your total income after including gaming winnings crosses the basic exemption limit or the mandatory filing threshold. In most practical cases involving gaming wins, it will.

Do not assume that because TDS has already been deducted, you do not need to file. TDS is an advance payment of tax. The ITR is your formal self-assessment and disclosure. The income tax department compares the data in your AIS with what you report in your ITR. Mismatches trigger notices.

If you have received a notice from the Income Tax Department about undisclosed gaming income or AIS mismatches, read our guide on why you might be getting an income tax scrutiny notice — and what to do about it.

 Obligations of the Online Gaming Platform

So far we have talked about this mostly from the player’s perspective. The platform — the online gaming intermediary — also has significant obligations under Section 194BA / 393(3):

•       Deduct TDS at 30% on net winnings at the time of each withdrawal and at year-end on any remaining balance
•       Deposit the TDS with the central government within the prescribed due dates (7th of the following month for most months, 30 April for the March quarter)
•       File quarterly TDS returns in the prescribed form within the due dates
•       Issue TDS certificates to players from whom TDS was deducted (these are the certificates players need when filing their ITR to claim TDS credit)
•       If the player’s balance is insufficient to cover the year-end TDS, the platform must fund the shortfall and then recover it from the player
•       Maintain separate accounting for each user account, tracking deposits, withdrawals, opening balance, closing balance, and net winnings across all games played by that user

Platforms that fail to deduct TDS on time become liable as “assessee in default” under the income tax law. This can result in interest charges, penalties, and in serious cases, prosecution. The income tax department has been actively reviewing TDS compliance in the online gaming sector.

How PKC India Can Help

Section 194BA and the related income tax rules around online gaming are more complex than they first appear. The net winnings formula, the timing of TDS deductions, the treatment of bonuses, the interaction with your ITR, and now the new section numbering under the Income Tax Act, 2025 — there are multiple moving parts.

If you are a regular online gamer with significant winnings, you may be in a situation where:

•       TDS deducted by the platform exceeds your actual tax liability — and you are entitled to a refund you have not claimed
•       TDS deducted is less than what you should have paid — because of surcharge on high incomes or other adjustments
•       You have gaming income from multiple platforms and are unsure how to aggregate and report it
•       You received a notice from the income tax department about AIS mismatches related to gaming income

At PKC India, our team of Chartered Accountants works with individuals and businesses across income types, including the relatively new area of online gaming taxation. We help with ITR filing, advance tax planning for gaming income, TDS credit reconciliation, and responding to income tax notices. If you are a gaming platform, we can also assist with TDS compliance, quarterly returns, and ensuring your deduction processes align with the current rules under the Income Tax Act, 2025.

Visit our PKC India to learn more about our services or to schedule a consultation.

Disclaimer: This blog has been prepared for general informational purposes only and does not constitute legal or tax advice. Tax laws, rates, and section references are subject to change. For FY 2025-26, the Income Tax Act, 1961 provisions apply. From 1 April 2026, the Income Tax Act, 2025 governs new transactions. Readers should verify current rules and consult a qualified Chartered Accountant or tax professional before making any tax-related decisions. Information in this article reflects the position as understood in May 2026. The Promotion and Regulation of Online Gaming Act, 2025 and the GST Gameskraft Supreme Court case were ongoing at the time of writing, and their outcomes may affect the legal and tax landscape for online gaming.

 FAQs

1. What is Section 194BA and when did it come into effect?

Section 194BA is the provision under the Income Tax Act, 1961, that requires online gaming platforms to deduct TDS on net winnings from online games. It was introduced by the Finance Act, 2023, and became effective from 1 April 2023. Unlike the earlier Section 194B (which applied to lotteries and general gambling with a Rs. 10,000 threshold), Section 194BA has no threshold — TDS applies on every rupee of net winnings. The TDS rate is 30%.

2. How are net winnings calculated under Section 194BA?

Net winnings are calculated using the formula under Rule 133: Net Winnings = (Amount Withdrawn + Closing Balance) minus (Opening Balance + Non-Taxable Deposits). In simple terms, you subtract what was in your account at the start of the year and what you deposited from your own bank account, from what you end up with (withdrawals plus remaining balance). Only the genuine profit gets taxed. Bonuses and incentives given by the platform are treated as taxable deposits and do not reduce the net winnings calculation.

3. Is TDS deducted on every withdrawal from a gaming account?

Yes, TDS is deducted at the time of each withdrawal from the gaming account. However, TDS is only on the net winnings portion of the withdrawal — not on the portion that represents the return of your own deposits. If the net winnings formula shows zero or negative net winnings at the time of withdrawal, no TDS is deducted at that point. Additionally, at the end of each financial year (31 March), TDS is deducted on any remaining net winnings balance in the account that has not yet been subject to TDS.

4. What changed under the new Income Tax Act 2025 for online gaming TDS?

The Income Tax Act, 2025, came into force on 1 April 2026, replacing the Income Tax Act, 1961. Under the new Act, all TDS provisions (other than salary) have been consolidated into Section 393. Section 194BA from the old Act is now effectively covered under Section 393(3) of the new Act. The tax rate remains 30% on net winnings, and there is still no threshold. The manner of computing net winnings under Rule 133 continues to apply. For transactions on or before 31 March 2026, the old Act and old section numbers apply. For transactions from 1 April 2026 onwards, the new Act and Section 393(3) apply.

5. Do Dream11 and MPL winnings attract TDS under Section 194BA?

Yes. Fantasy sports platforms like Dream11 and MPL were fully covered under Section 194BA for all periods they operated real-money contests. The law makes no distinction between skill-based games and chance-based games — both attract the same 30% TDS on net winnings. The Indian government passed the Promotion and Regulation of Online Gaming Act in August 2025, which banned real-money online gaming including fantasy sports, leading to platforms like Dream11 suspending paid contests. For historical winnings earned before August 2025, Section 194BA TDS was deducted and must be reported in ITR.

6. Can gaming losses be set off against other income?

No. Gaming losses cannot be set off against any other income. This is explicitly prohibited under Section 58(4) of the Income Tax Act. If your net winnings for the year work out to zero or negative (meaning you lost money), you simply pay no tax on gaming income for that year — but you also get no benefit from the losses. You cannot reduce your salary, business income, or any other income using gaming losses. Each gaming platform also computes net winnings independently for its own user accounts, so losses on one platform cannot reduce profits on another.

7. What GST applies to online gaming platforms, and does it affect players?

Since 1 October 2023, online gaming platforms pay 28% GST on the full face value of every player deposit. This is the platform’s tax obligation, not the player’s direct liability. However, the economics affect players indirectly — platforms absorb this cost partly through reduced prize pools or adjusted fee structures. This 28% GST is separate from and in addition to the income tax TDS deducted on net winnings under Section 194BA. Gaming companies are challenging the 28% rate and its retrospective application in the Supreme Court (the Gameskraft batch of cases). As of May 2026, the verdict was pending.