Taxation of Gaming Receipts

• Section 194B levies tax on winnings from lottery, crossword puzzle, card game and other games

Section 194BB levies tax on winning from racing in any racecourse or for wagering or betting in any race course.

• These winning are taxable at the rate of 30% under Section 115BB if they exceeded INR 10K and include winnings from any sort of gambling or betting of any form

• It was interpreted that each transaction was to exceed INR 10K to become taxable resulting in leakage of tax.

• To plug this loophole, now it is proposed to amend both Section 194B and 194BB as follows :

The winnings, in each case under Sections 194B and 194BB (as amended) will be aggregated. S. 194B specifically excludes winning from online gaming w.e.f. 1 July 2023 .All the transactions will be aggregated to apply the threshold of 10K in each case and losses will also be allowed to be deducted to determine the net taxable winnings under each section. Tax as per Section 115BB would be levied on the net winnings.

• The new Section 194BAwould apply to online gaming winnings.

• A new proposed S. 115BBJ and 194BAprovide definitions for all the aspects of online gaming such as : “computer resource” , “internet” , “online game” , “online gaming intermediary” , “user” , “user account” .

• In case of online gaming, whenever net winning is withdrawn, the 30% tax is to be deducted and the winnings will include both cash and kind. If cash is not enough to cover the tax, payer has to ensure that the tax is paid. If there is balance left at the end of the year in the user account, tax will need to be deducted on the same even if not withdrawn.

The changes in Section 115BB and the new section 115BBJ are effective from 1April 2023

Whereas the change in Section 194B and insertion of Section 194BB are effective from 1 July 2023.