TDS on Online Gaming Winnings

The Central Board of Direct Taxes (CBDT) has issued guidelines for the removal of difficulties under sub-section (3) of section 194BA of the Income-tax Act, 1961, which mandates TDS deduction on online gaming winnings. These guidelines are effective from 1st April 2023, as per Notification Number 05/2023.

The guidelines clarify that 'net winnings' are to be computed separately for each user account, and that multiple wallets under one user are to be considered as separate user accounts. The computation of net winnings is to be done as per Rule 133 of the Income-tax Rules, 1962.

The guidelines also provide clarification on various aspects, such as the treatment of bonus, referral bonus, and incentives, and the point at which an amount is considered to be withdrawn from a user account. For example, bonus, referral bonus, and incentives are to be considered as taxable deposits, while certain incentives that are credited to a user account only for playing and cannot be withdrawn are to be ignored for the calculation of net winnings.

It is the duty of the person responsible for deducting tax at source under section 194BA to ensure that the tax is deducted as required. For more information, please refer to the official notification and consult with a tax consultant before taking any action.

Please note that these guidelines are binding on income-tax authorities and persons liable to deduct income-tax. To ensure compliance, it is essential to carefully review the guidelines and seek professional advice if needed.