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

• The Central Board of Direct Taxes (CBDT) has come out with guidelines for Tax Deducted at Source (TDS) for online gaming platforms.

What is the TDS Provision for Online Gaming?

• With an aim to track the online gaming industry, the government inserted a new section (194BA) in the Income-tax Act, 1961 through Finance Act 2023.
• It mandates online gaming platforms to deduct income-tax on the net winnings in the person’s user account.
• TDS will be applicable at the rate of 30% on the net winnings from any online gaming.
• Tax is required to be deducted at the time of withdrawal as well as at the end of the financial year.

Example of Online Gaming Tax:

• Suppose a user has paid Rs.1,000 as an entry fee to enter an online game and won Rs.40,000 from that.
  • In such a case, the gaming firm will deduct the user’s TDS on Rs. 39,000 (Rs. 40,000 - Rs. 1,000) at 30%.
• Therefore, the user will have to pay a tax of Rs. 11,700, which will get deposited to the government and the remaining balance of Rs. 27,300 will be credited into your account as your income from the win.

How will net Winnings get Calculated if a User has Multiple Wallets?

• 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.
• 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.

What are the Guidelines for TDS for Online Gaming?

• Online gaming platforms will not be required to deduct tax at the source for a player if the net winning does not exceed Rs 100.
• The bonus, referral bonus, and incentives given by the online gaming company to the intermediate user will be considered as taxable deposit under the Income-tax Act.