TMI BlogTDS on Winnings from online games - Guidelines for removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... s responsible for paying to any person any income by way of winnings from any online game during the financial year to deduct income-tax on the net winnings in the person's user account. Tax is required to be deducted at the time of withdrawal as well as at 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. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts would be considered as deposit {non-taxable or taxable as per the definition in Rule 133) and withdrawal from any user accounts would be considered as withdrawal. Let us suppose that there is first withdrawal from any of these user accounts. Net winnings for the purposes of calculating tax required to be deducted under section 194BA shall be calculated as under Net winnings =A-(B+C), where A = Amount withdrawn from the user account; B = Aggregate amount of non-taxable deposit made in the user account by the owner of such account during the financial year, till the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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecessary that the amount deposited by the user is not taxable i.e. it is from already taxed income or it is not chargeable to tax. In a case where user borrows the money and deposit in his user account, it shall be considered as non-taxable deposit. Question 3) How will bonus, referral bonus, incentives etc. be treated? Answer: Bonus, referral 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 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed with the same online gaming intermediary, of the same user shall not be considered as withdrawal or deposit, as the case may be. However, when the amount is withdrawn from the user account to any other account, it shall be considered as withdrawal With respect to deductor, any account of user which is not registered with the online game intermediary (for which he 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 sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al year; and (iii) the deductor undertakes responsibility of paying the difference if the balance in the user account at the time of tax deduction under section 194BA of the Act is not sufficient to discharge the tax deduction liability calculated in accordance with Rule 133. Question 6) When the net winnings is in kind how will tax deduction under section 194BA operate? Answer; At the outset, 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 sit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... winnings. In that case, the price that it charges to its customers for such items shall be the value for such winnings. It is further clarified that GST will not be included for the purposes of valuation of winnings for TDS under section 194BA of the Act. Question 8) These guidelines have been issued after 1.4.2023 while the law has come into effect from 1.4.2023. Will there be any relaxation on penal consequences in the intervening period i.e. between 1.4.2023 and the date on which the Rules / guidelines are issued? Answer: Taxpayers were expected to deduct tax at source under section 194BA even before issuance of the Rule 133 or this guidance. It is expected that they have carried out that responsibility. However, if there ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
