TDS To Be Deducted By Online Game Platforms When The Winning Amount Exceeds The Threshold Of Rs. 100: CBDT

The Central Board of Direct Taxes (CBDT) has issued the Guidelines for the removal of difficulties under section 194 BA (3) of the Income-tax Act, 1961.

The new section mandates a person, who is responsible for paying 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.

Section 194BA (3) of the Income Tax Act authorizes the Central Board of Direct Taxes (CBDT) to issue guidelines, for the purposes of removal of difficulties with the previous approval of the Central Government.

The CBDT clarified that tax may not be deducted on withdrawal on the satisfaction of all of the three conditions. Firstly, when the net winnings comprise the amount withdrawn does not exceed Rs 100 in a month. Secondly, tax not deducted on account of this concession is deducted at a time when the net winnings in withdrawal exceed Rs 100 in the same month or subsequent month or if there is no such withdrawal, at the end of the financial year. Lastly, 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 is not sufficient to discharge the tax deduction liability calculated in accordance with Rule 133.

GST will not be included for the purposes of valuation of winnings for TDS under section 194BA of the Act.

Rule 133 has also clarified that transfer from one user account to another user account, maintained with the same online gaming intermediary, of the same user shall not be considered a withdrawal or deposit, as the case may be. However, if the deductor is deducting tax under section 194BA for each platform separately transfer from one user account to another user account under the online gaming intermediary across platforms shall be considered as withdrawal or deposit for the purposes of calculation of net winnings under Rule 133.

Circular No.5 of 2023

Date: 22/05/2023

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