CBDT releases Circular clarifying TDS provisions on income by way of winnings from Online Games

Central Board of Direct Taxes (CBDT) has issued a circular clarifying Tax Deducted at source (TDS) provisions on income by way of winnings from any online game.

Finance Act 2023 inserted a new section 194BA in the Income-tax Act, 1961 (hereinafter referred to as “the Act”) with effect from 1st April 2023. Most Importantly the circular has clarified the manner of computation of net winning which is prescribed in Rule 133 of the Income-tax Rules 1962, vide notification no. 28/2023 dated 22nd May 2023.

The Circular has clarified that “that user account shall include every account of user, by whatever name called, which is registered with online gaming intermediary and where any taxable deposit, non-taxable deposit or the winning of the user is credited and withdrawal by the user is debited. Thus each wallet which qualifies as user account shall be considered as user account for the purposes of computing net winnings.

It has further been clarified in the Rule 133 that whenever there are multiple user accounts of the same 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.”

Bonus, referral bonus, incentives etc. considered as taxable deposit

Any deposit in the form of bonus, referral bonus, incentives etc would form part of net winnings and tax under section 194BA of the Act is liable to be deducted at the time of withdrawal as well as at the end of the financial year.

Click here to Read the Circular