The Income Tax department has released guidelines regarding Tax Deducted at Source (TDS) for online gaming platforms. The new guidelines establish a threshold of Rs 100 for deducting tax from winnings obtained through online gaming. If a player’s net winnings do not exceed Rs 100, online gaming platforms will not be required to deduct tax at the source. The government introduced a new section, 194BA, in the Income-tax Act, 1961, through the Finance Act, 2023. This section mandates online gaming platforms to deduct income tax on the net winnings in a person’s user account. Tax deductions are required at the time of withdrawal and at the end of the financial year.
To calculate the net winnings of an online gamer, the total deposits and opening balance in the user account are subtracted from the amount withdrawn.
Additionally, the circular stated that gaming companies have the option to deposit tax amounts for April, if not already done, along with the dues for May, by June 7. This will help them avoid any penal consequences.
The Central Board of Direct Taxes (CBDT) has clarified that to address challenges in deducting tax at source under section 194BA, no tax may be deducted if the following conditions are met:
(i) The net winnings comprised in the amount withdrawn do not exceed Rs 100 in a month.
(ii) If tax is not deducted due to this concession, it must be deducted when the net winnings in the withdrawal exceed Rs 100 in the same month or subsequent month, or at the end of the financial year if no such withdrawal occurs.
(iii) The deductor assumes the responsibility of paying the difference if the user account’s balance at the time of tax deduction is insufficient to cover the calculated tax liability according to Rule 133.
It’s important to note that transferring funds from one user account to another within the same online gaming intermediary, maintained by the same user, will not be considered as a withdrawal or deposit.