No TDS on winnings up to Rs 100: What are the new tax rules for online gaming?

“Some deposits could be money equivalent too like coins, coupons, vouchers, counters, etc. In such a situation, the equivalence in money of such deposits shall be considered as taxable deposits and would accordingly form part of the balance in the user account,” the circular said.

Also, the circular said that gaming companies can deposit the tax amounts for April, if not done already, along with the dues for May by June 7 to avoid penal consequences.

The CBDT said that in order to remove the difficulty in deducting tax at source under section 194BA of the Act for “insignificant withdrawal”, it is clarified that tax may not be deducted on withdrawal on the satisfaction of all of the following conditions (i) net winnings comprised in the amount withdrawn does not exceed Rs 100 in a month; (ii) tax not deducted on account of this concession is deducted at a time when the net winnings comprised in withdrawal exceeds Rs 100 in the same month or subsequent month or if there is no such withdrawal, at the end of the financial year; and (iii) the deductor undertakes the 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.

How will net winnings get calculated if a user on an online gaming platform has multiple wallets?

The CBDT said that under Rule 133 every user account will be included, by whatever name it is registered with the online gaming intermediary and where any taxable deposit, non-taxable deposit, or the winning of the user is credited and withdrawal is debited.

When there are multiple accounts of a user, each user account shall be considered for the purposes of calculating net winnings. The deposit, withdrawal or balance in the user account shall mean aggregate of deposits, withdrawals or balances in all user accounts, it said.

Transfer from one user account to another account, maintained with the same online intermediary, of the same user shall not be considered as withdrawal or deposit. However, if withdrawal or deposit will be done by one user to another user account, then any such transfer is a withdrawal.’

The valuation will be based on fair market value of the winnings in kind except when the online gaming intermediary has purchased the winnings before providing to the user, or when the online gaming intermediary manufactures such items as winnings.

What is the TDS provision for online gaming?

The online gaming industry has been under the lens of tax authorities for the last few years. With an aim to track such transactions, the government had inserted a new section 194BA in the Income-tax Act, 1961 through Finance Act 2023, which mandated online gaming platforms to deduct income-tax on the net winnings in the person’s user account.

In the Finance Bill amendments in March, the tax department changed the date of applicability of the TDS provision for online gaming to April 1, 2023 as opposed to an earlier proposed date of July 1, 2023.
Tax is required to be deducted at the time of withdrawal as well as at the end of the financial year. As per section 194BA, TDS will be applicable at the rate of 30 per cent on the net winnings from any online gaming.