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Section 194BA - Winnings from online games - Income Tax - Ready Reckoner - Income TaxExtract Winnings from online games Section 194BA [Inserted by FA, 2023 , w.e.f., 01-04-2023 Read with Section 115BBJ ] who is responsible to deducted TDS : Any person responsible for paying to any person any income by way of winnings from any online game during the FY shall deduct income-tax on the net winnings in his user account, At which time Tax should be deducted:- Tax should be deducted at the end of financial year. However, In case of withdrawal from user account during the financial year, TDS shall be at the time of such withdrawal on the net winnings comprised in such withdrawal, as well as on the remaining amount of net winnings in the user account, computed at the end of the FY. In case winnings is wholly in kind or partly in cash: In a case 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, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings. Deductee: Any person ( user - who accesses or avails any computer resource of an online gaming intermediary) winning from online gaming. Threshold Limit :- There is no threshold Limit. Rate of TDS: 30% on Net winning online Game calculated according to rule 133 of Income tax rule, 1961. Rate of TDS will be increase by the surcharge Cess if recipient of winning is non- resident. Manner for Computation of net winnings - In exercise of powers conferred by section 115BBJ read with section 194BA, the CBDT has, vide Notification 28/2023 dated 22.05.2023 inserted Rule 133 to prescribed the manner for computation of net winnings. Computation of net winnings for the previous year [ Sub Rule 1 ] Net winnings from online games during the previous year, for the purposes of section 115BBJ, shall be calculated using the following formula, namely: Net winnings =(A+D)-(B+C), where A = Aggregate amount withdrawn from the user account during the financial year; B = Aggregate amount of non-taxable deposit made in the user account by the assessee during the financial year; C = Opening balance of the user account at the beginning of the financial year; and D= Closing balance of the user account at the end of the financial year. [ Sub Rule 2 ] Net winnings comprised in the first withdrawal during the financial year, for the purposes of section 194BA, shall be calculated using the following formula, namely: 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. Note - Net winnings in the formula given in rule 133(2) shall be zero, if the sum of amounts B and C is equal to or greater than the amount A. [ Sub Rule 3 ] [ Sub Rule 4 ] Net winnings comprised in each subsequent withdrawal during the financial year, for the purposes of section 194BA, shall be calculated using the following formula, namely: Net winnings =A-(B+C+E), where A = Aggregate amount withdrawn from the user account during the financial year till the time of subsequent withdrawal including the amount of such subsequent withdrawal; 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 subsequent withdrawal; C = Opening balance of the user account at the beginning of the financial year; and E= Net winnings comprised in the earlier withdrawal or withdrawals computed under rule 133(2), or under this sub-rule, during the financial year till the time of subsequent withdrawal if tax has been deducted in accordance with the provision of section 194BA on winnings comprised in such withdrawal or withdrawals. Note - Net winnings in the formula given in rule 133(4) shall be zero, if the sum of amounts B, C and E is equal to or greater than the amount A. [ Sub Rule 5 ] [ Sub Rule 6 ] Net winnings comprised in the user account at the end of the financial year, for the purposes of section 194BA, shall be calculated using the following formula, namely: Net winnings =(A+D)-(B+C+E), where A = Aggregate amount withdrawn from the user account during the financial year; B = Aggregate amount of non-taxable deposit made in the user account by the owner of such account during the financial year; C = Opening balance of the user account at the beginning of the financial year; D= Closing balance of the user account at the end of the financial year; and E= Net winnings comprised in the earlier withdrawal or withdrawals computed under rule 133(2) or (4), during the financial year if tax has been deducted in accordance with the provision of section 194BA on winnings comprised in such withdrawal or withdrawals. Note - Net winnings in the formula given in sub-rule (6) shall be zero, if the sum of amounts B, C and E is equal to or greater than the sum of amount A and D. [ Sub Rule 7 ] Meaning of certain Terms (a) non-taxable deposit means the amount deposited by the user in his user account and which is not taxable; (b) taxable deposit means any amount deposited in the user account which is not a non-taxable deposit and includes any amount paid directly to the user not through the user account; and (c) withdrawal means any amount withdrawn by the user from any user account. Important Point for consideration Use Account - user account shall include every account of user, by whatever name called, which is registered with the online gaming intermediary and where any taxable deposit, non-taxable deposit or the winnings made by the user is credited and withdrawal by the user is debited. Multiple use account - whenever there are multiple user accounts of the same user, each user account shall be considered for the purposes of calculating net winnings and the deposit, withdrawal or balance in the user account shall mean aggregate of deposit, withdrawal or balance in all user accounts. Transfer from one user account to another user account - whenever there are multiple user accounts of the same user, transfer from one user account to another user account, maintained with the same online gaming intermediary , of the same user shall not be considered as withdrawal or deposit , as the case may be, for the purposes of deducting tax under section 194BA. Payment in Cash or Kind whenever there is payment to the user in kind or in cash, or partly in kind and partly in cash, which is not from the user account, the provisions of this rule shall apply to calculate net winnings by deeming that the money equivalent to such payment has been deposited as taxable deposit in the user account and the equivalent amount has been withdrawn from the user account at the same time and shall accordingly be included in amount A; Taxable deposit in the form of Bonus whenever there is taxable deposit in the form of bonus, referral bonus, incentives, promotional money, discount by whatever name called; and such deposit can only be used for playing the online games and not for withdrawal or any other purposes, such deposit shall be ignored for the purposes of calculation of net winnings and shall not be included in amount B or amount C or amount D; and whenever any bonus, referral bonus, incentives, promotional money, discount, by whatever name called, is not considered as part of amount B or amount C or amount D under clause (e) and subsequently they are re-characterised and allowed to be withdrawn, they shall be deemed as taxable deposit at the time of such re-characterisation and it shall be deemed that the equivalent amount has been deposited in the user account at that time. Powers of CBDT to issue Guidelines [ Section 194BA(3) ] If any difficulty arise in giving effect to the provisions of this section, THE CBDT may, with the previous approval of the Central Government, issue guidelines for the purposes of removing the difficulty Guidelines for removal of difficulties under section 194BA(3) of the Income-tax Act, 1961. [ Vide Circular NO. 5 of 2023 dated 22.05.2023 ] Other Important Point The deductor may deduct the tax u/s 194BA and pay to the Government. In the Form 26Q the deductor will need show this as tax deducted by him on net winning u/s 194BA.
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