The Income Tax department has issued guidelines outlining the Tax Deducted at Source (TDS) rules for online gaming platforms. According to the new guidelines, if a player’s net winnings from online gaming are below Rs 100, no tax will be deducted at the source by the gaming platform. This threshold has been established under section 194BA of the Income-tax Act, 1961, which was introduced through the Finance Act, of 2023.
The guidelines specify that online gaming platforms must deduct income tax on the net winnings in a user’s account during withdrawal and at the end of the financial year. To calculate net winnings, the amount withdrawn is subtracted from the total deposits and opening balance in the user account.
The circular also states that gaming companies have the option to deposit tax amounts for April, if not done already, along with the dues for May, by June 7 to avoid penalties.
The Central Board of Direct Taxes (CBDT) has clarified that no tax deduction is required under section 194BA if the following conditions are met: (i) The net winnings in the amount withdrawn do not exceed Rs 100 in a month. (ii) If no tax is deducted due to this concession, it must be deducted when the net winnings in the withdrawal exceed Rs 100 in the same or subsequent month, or at the end of the financial year if no such withdrawal occurs. (iii) The deductor is responsible for paying the difference if the user account balance at the time of tax deduction is insufficient to cover the calculated tax liability as per Rule 133.
It should be noted that transferring funds between user accounts within the same online gaming intermediary, maintained by the same user, will not be considered a withdrawal or deposit.