Don't miss out: The ultimate guide to taxes on online gaming winnings uncovered!

CBDT's guidelines impose 30% TDS on all online game winnings, remove the threshold, and tax bonuses. It may impact player participation and wagered amounts.

TDS for online game
  • CBDT guidelines require online game companies to deduct 30% TDS on all winnings, with no threshold.
  • Bonuses, referral bonuses, and incentives provided by gaming companies are also taxable.
  • TDS on online game winnings can be deducted upon withdrawal or at the end of the financial year.

Welcome to the world of online gaming, where exhilaration meets taxation. With the growing popularity of online games and the surge in winnings, the Central Board of Direct Taxes (CBDT) has laid down guidelines for companies on how to handle tax deductions on these winnings.

In this article, we delve into the intricacies of TDS (Tax Deducted at Source) on online game winnings, exploring how companies navigate these guidelines to ensure compliance.

What is the highlight of the latest CBDT guidelines?

Effective April 1, 2023, online game companies are obligated to deduct TDS at a 30% rate on all winnings as per the newly introduced Section 194BA of the Income Tax Act. The previous threshold of Rs. 10,000 for TDS on online game winnings no longer applies FY 2023-24 onwards.

Note: No TDS deduction for online gaming if net winnings are below Rs. 100.

Are bonuses, referral bonuses and incentives taxable?

The CBDT circular states that bonuses, referral bonuses, incentives, etc. provided by online gaming companies to intermediate users are taxable deposits under Rule 133 of the Income-tax Act.

How will TDS on winning online games be deducted?

According to Section 194BA, the tax on winnings from online games will be deducted either upon withdrawal or at the end of the financial year if no withdrawal is made.

Also Read: The shocking truth of gaming taxation

How are net winnings calculated?

As per CBDT guidelines, TDS computation for net winnings involves deducting total fresh deposits and opening balance from the total withdrawal amount.

Net winnings = Withdrawal - (Deposits + Opening Balance)

How is tax calculated if an individual has multiple accounts?

Below are the tax deduction scenarios for individuals with multiple accounts:

  • If a user has multiple user accounts with an online gaming company, the net winnings for TDS deduction will be calculated as the total withdrawal from all accounts - (total fresh deposits in all accounts + total opening balance of all accounts).
  • TDS will be deducted at 30% on the net winnings if the amount exceeds Rs. 100 in a month.
  • If the net winnings according to the formula come out to be negative, TDS won't be applicable.
  • If the gaming company has multiple gaming platforms, the net winnings for every gaming platform will be computed separately and TDS will be levied accordingly.

Also ReadOnline game winnings taxed at 30% - bye bye Rs. 10,000 threshold!

The introduction of CBDT guidelines for tax deductions on online game winnings marks a significant development in the world of online gaming. They have the potential to impact the online gaming landscape, possibly discouraging players and leading to a decrease in player participation and wagered amounts. It is essential for both gaming companies and players to understand and navigate these guidelines to ensure compliance and avoid any unintended consequences.

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