Which Tax Provisions Attach to Money Moving Through a Game Account

Four separate provisions can attach to money on the route described elsewhere on this site, and they sit in three different statutes. They do not overlap neatly, they are computed on different bases, and a person can be inside more than one of them at the same time.

This page sets out what each provision says and what it is computed on. A tax provision addressed to an activity is not a statement that the activity is permitted, and the two must never be read as answering each other. Nothing here is tax or legal advice; the figures are provisions of published law, not a calculation of anyone’s liability.

What does section 115BBJ tax?

Section 115BBJ of the Income-tax Act charges income by way of winnings from any online game at a flat rate of 30 per cent. It applies to net winnings rather than to gross receipts, and it carries no basic exemption: the slab that shelters ordinary income does not shelter income taxed under this section.

Surcharge and health-and-education cess apply on top of the 30 per cent in the normal way.

How is “net winnings” computed?

By formula, under Rule 133 of the Income-tax Rules. Net winnings during the previous year equal (A + D) − (B + C), where:

• A is the aggregate amount withdrawn from the user account during the financial year.
• B is the aggregate of non-taxable deposits made into the user account during the year.
• C is the opening balance of the user account at the start of the year.
• D is the closing balance of the user account at the end of the year.

The formula is worth reading twice, because it works on the account rather than on a session. Deposits reduce the figure, withdrawals increase it, and the year-end balance counts as though it had been withdrawn.

A balance left sitting in an account at 31 March is inside D whether or not anybody touched it.

What does section 194BA require?

Section 194BA obliges the person responsible for paying winnings from an online game to deduct tax at source on the net winnings in the user’s account. The deduction is made at the time of withdrawal and again at the end of the financial year on whatever remains.

The rate is 30 per cent, matching section 115BBJ, and there is no threshold. Unlike most TDS provisions, there is no minimum amount below which deduction is not required, so the whole of the net winnings is within scope.

What does section 194S deduct, and on what?

Section 194S is a different provision on a different event: the transfer of a virtual digital asset. Tax at 1 per cent is deductible on the consideration for such a transfer once the annual value crosses ₹10,000, or ₹50,000 in the case of specified persons — individuals and Hindu undivided families without income under profits and gains of business or profession, and those whose business turnover does not exceed ₹1 crore.

This one attaches to the conversion step, not to the game. It fires when rupees become a coin or a coin becomes rupees, which on the route described on our page about the rupee route happens at the second hop out and again on the way back.

It is a deduction against tax, creditable in the return, not a charge.

What does section 115BBH tax?

Income from the transfer of a virtual digital asset, at a flat 30 per cent. Its restrictions are what make it distinctive:

• Only the cost of acquisition is deductible. Gas fees, brokerage and other expenses are not.
• A loss on one virtual digital asset cannot be set off against a gain on another.
• Such a loss cannot be set off against any other head of income either.
• It cannot be carried forward to a later assessment year.

The disallowance of set-off is the part most often missed. Under this section a year of gains and losses is not netted; the gains are taxed and the losses are simply gone.

Where does GST come in?

On the deposit, not on the winnings. With effect from 1 October 2023, the CGST Act was amended to define online gaming, online money gaming and specified actionable claims, and paragraph 6 of Schedule III was amended to substitute “specified actionable claims” for the earlier reference to lottery, betting and gambling.

Rule 31B of the CGST Rules sets the valuation. The value of the supply is based on the total amount deposited with the supplier, taxed at 28 per cent, and the rate applies irrespective of whether the activity is characterised as a game of skill or a game of chance. Rule 31C does the equivalent job for casinos.

So the base shifted from the platform’s commission to the money the player put in. That is a different base from every income-tax provision above.

Four provisions, four different bases

Provision	Rate	Computed on	Triggering event
Section 115BBJ	30 per cent	Net winnings under Rule 133	Income for the year
Section 194BA	30 per cent	Net winnings in the user account	Withdrawal, and year end
Section 194S	1 per cent	Consideration for the transfer	Transfer of a virtual digital asset
Section 115BBH	30 per cent	Gain, cost of acquisition only	Income from a VDA transfer
Rule 31B, CGST Rules	28 per cent	Total amount deposited	Deposit with the supplier

Nothing in that table nets against anything else in it. They are separate charges under separate laws on separate events.

Who is supposed to deduct what?

Not the account holder, in either TDS provision. Section 194BA places the obligation on the person paying the winnings, and section 194S on the person paying the consideration for the transfer. In practice that means a platform and an exchange respectively.

An obligation that sits on an offshore company is an obligation that may not be discharged, and a deduction that is never made does not remove the underlying charge on the recipient. The gap between what is deducted and what is chargeable is where the practical problem lives, and it is not a gap this page can close.

What none of this settles

Whether the activity generating the money is permitted. The Promotion and Regulation of Online Gaming Act, 2025 came into force on 1 May 2026 and governs that question on its own terms; the tax provisions above sit in the Income-tax Act and the GST framework and operate independently of it. A charge under one does not create a permission under the other.

The legal position is summarised in the note on our Bitcoin casinos guide, and the contractual steps that stand between a balance and a payout are described on our pages about withdrawal limits and document requests. For anything with money at stake, take it to a chartered accountant or a lawyer rather than to a comparison site.