TDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961 - Income Tax - 05/2023

..... the end of the financial year. Net winning is required to be computed in the manner as may be prescribed. The manner of computation of net winning has now been prescribed in Rule 133 of the Income-tax Rules 1962 . vide notification no. 28/2023 dated 22nd May 2023. Sub-section (3) of section 194BA of the Act authorises Central Board of Direct Taxes (CBDT) to issue guidelines, for the purposes of removal of difficulties with the previous approval of the Central Government. These guidelines are required to be laid before each House of Parliament and are binding on the income-tax authorities and the person liable to deduct income-tax. Accordingly, in exercise of the power conferred by sub-section (3) of section 194BA of the Act, CBDT hereby iss .....

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TDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961 - Income Tax

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..... ed to be deducted under section 194BA shall be calculated as under Net winnings =A-(B+C), where A = Amount withdrawn from the user account; B = Aggregate amount of non-taxable deposit made in the user account by the owner of such account during the financial year, till the time of such withdrawal; and C = Opening balance of the user account at the beginning of the financial year. Here for the purposes of calculating amount B, the non-taxable deposits in all of the user accounts under that deductor (one TAN) is to be aggregated. Same would apply for calculating all other amount for calculation under Rule 133. However, if the one deductor (one TAN) is having multiple platforms and it is not technologically feasible for him to integrate multip .....

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TDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961 - Income Tax

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..... ferral bonus, incentives etc are given by the online game intermediary to the user. They are to be considered as taxable deposit under Rule 133. The taxable deposit will increase the balance in user account and is not allowed to be deducted in calculation of net winnings as only non-taxable deposits are allowed to be deducted. Thus any deposit in the form of bonus, referral bonus, incentives etc would form part of net winnings and tax under section 194BA of the Act is liable to be deducted at the time of withdrawal as well as at the end of the financial year. Some deposit could be money equivalent too like coins, coupons, vouchers, counters etc. In such a situation the equivalence in money of such deposit shall be considered as taxable depo .....

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TDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961 - Income Tax

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..... is a deductor) is an account which is not a user account and any transfer from user account to such account is a withdrawal. When in consideration of amount in user account, some coupons etc are issued for purchase of goods or services, or some item in kind is issued, that will also be considered as withdrawal. It is the duty of the person who is required to deduct tax at source under section 194BA of the Act to ensure that the tax, as required to be deducted, is deducted at source under section 194BA , before issuing such coupons or items in kind. The clarification provided in answer to Question no 1 is also needed to be kept in mind. It has been clarified that if the deductor is deducting tax under section 194BA of the Act for each platf .....

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TDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961 - Income Tax

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..... it may be clarified that where money in user account is used to buy an item in kind and given to user then it is net winnings in cash only and the deductor is required to deduct tax at source under section 194BA of the Act accordingly. However, there could be a situation where the winning of the game is a prize in kind. In that situation provision of sub-section (2) of section 194BA of the Act will operate. According to this where the net winnings are wholly in kind or partly in cash, and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the net winnings. In these situations, the person responsible for paying, shall, before releasing the winnings, ensure that tax has been .....

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TDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961 - Income Tax

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