The Income Tax Appellate Tribunal (ITAT) Bangalore recently changed the tax on real-money gaming scenario. The new ruling said the tax on online real-money gaming should be calculated on the net amount credited after winning. The case came to light after Channappa, a Bengaluru-based player, had put Rs. 2.61 crore into online rummy and poker. In the end, he lost around Rs. 28 lakh. The tax department, however, treated Rs. 2.33 crore credited to his gaming accounts as taxable winnings.
The ITAT ruled in his favor on July 23, 2026. The tribunal found that the tax officer noticed the money credited to the account without fully considering the amount put into the games. The records showed that Channappa suffered a net loss. The tribunal therefore ordered the removal of the Rs. 2.33 crore tax addition.
The case came up after the tax department found gaming records linked to Rummyculture and Gamezy, operated by Gameskraft Technologies. The records showed total buy-ins of Rs. 2.61 crore and gross winnings of Rs. 2.33 crore. On this basis, the AO mentioned that the full amount credited to the winning player should be treated as taxable gaming income.
It further noted that Section 115BB provides for a flat rate of tax on winnings from lotteries, crossword puzzles, races, card games and other games, irrespective of the taxpayer’s normal income-tax slab. The tribunal noted that no tax had been deducted at source on any net winnings in the case.
The ITAT considered the tax rules that were in force before the Finance Act, 2023. It considered Sections 115BB and 194B, which covered income from winnings. The newer rules introduced Sections 115BBJ and 194BA for online gaming. These rules focus on net winnings.
The case highlights an important point for online gamers. Money moving through a gaming account does not always mean it is actual income. The final result can depend on the amount won and the money put into the games.
The ITAT ruling gives Channappa relief from a tax demand on money he had not actually earned as net income. It could also become an important reference in future disputes involving online gaming and tax.