ITAT Bangalore Rules Only Net Profits From Online Real-Money Gaming Are Taxable

ITAT Bangalore ruling on online gaming taxation

The Income Tax Appellate Tribunal in Bangalore has ruled that only net profits, not gross winnings, from online real-money gaming activities should be taxed. The bench of Accountant Member Waseem Ahmed and Judicial Member Soundararajan K. delivered the judgment in a case involving a Bengaluru resident who had wagered on online rummy and poker through portals run by Gameskraft Technologies Pvt. Ltd. The decision centers on how taxable income is computed when a player’s aggregate deposits exceed payouts over an assessment year.

Bengaluru gamer’s case

The taxpayer, identified as Mr Channappa from Doddakallasandra, Bengaluru, invested more than Rs 2 crore to play online rummy and poker and recorded a net loss of Rs 28 lakh before stopping. He filed his income tax return reporting Rs 4.32 lakh in total income drawn from house property, business and other sources, and did not disclose the gaming activity. The Income Tax Assessing Officer in Bangalore selected the return for scrutiny after receiving information that Channappa had participated in gaming on the “Rummyculture” and “Gamezy” portals, where he was reported to have won Rs 2.33 crore.

How the tribunal framed the tax calculation

According to the report, ITAT Bangalore held that gross wins reported by gaming platforms cannot be treated as taxable income when the taxpayer’s net result across the same activity is a loss. The ruling effectively allows a player to set off total deposits against total winnings before computing income from online real-money gaming, limiting the tax base to positive net earnings rather than turnover or gross payouts. The case is being cited as a precedent for taxpayers disputing demands that use platform-reported gross winning figures as taxable receipts.

Background on the department’s wider action

The report notes that on March 15, 2022, the Income Tax Department conducted a search and seizure operation at the offices of Gameskraft, the operator of the platforms used by Channappa, as part of a broader probe into online real-money gaming companies. The tribunal’s ruling comes against that backdrop of heightened departmental scrutiny of gaming operators and high-value players, and could influence how assessment officers treat gross winnings data shared by gaming platforms during scrutiny proceedings.

Other developments

Separately, Variety reported that Chinese director Dong Jie’s debut feature “Zoom In, Zoom Out,” which uses online gaming as a device to drive the search for a missing roommate, is premiering in Venice Critics’ Week.