Previously, Section 194B of the Income Tax Act was used to tax income derived from winnings from lotteries, crossword puzzles, gaming, betting, horse racing, and similar activities.

After Budget 2023, the new tax implications w.e.f. 01 Apr, 2023:

Section 194BA for TDS on winnings from online games for intermediaries, and

Section 115BBJ for computing taxes on income from online game winnings

Gaming platforms are now required to deduct 30% TDS (Section 194BA) from their net winnings under the new regulations. These regulations seek to ensure compliance in the online gaming sector while streamlining the taxation process.

Key Guidelines for TDS on Online Gaming Platforms:

 1. Calculation of Net Winnings: 

The amount withdrawn during the year will be subtracted from the total deposits made during the financial year, as well as the opening balance in the user account, to determine the net winnings. 

This calculation method makes sure that tax is only assessed on the user’s actual net winnings.

 2. Multiple Wallets under One User:

All user accounts that are registered with an online gaming intermediary and into which taxable or non-taxable deposits, winnings, and withdrawals are credited or debited are considered to be user accounts. 

This makes sure that when calculating net winnings, all pertinent transactions are taken into account.

 3. INR 100 Threshold:

In the event that the withdrawal of net winnings does not exceed INR 100, online gaming platforms are not required to deduct TDS. 

With this limit, “insignificant withdrawals” will no longer be subject to tax deductions.

 4. Bonus and Incentives:

Any deposit made to a user account in the form of a bonus or incentive will be regarded as net winnings and subject to taxation upon withdrawal. 

This clause makes sure that all forms of income, including bonuses, are tracked and given the proper tax treatment.