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New Tax Rules For Online Gaming

New Tax Rules For Online Gaming:

The Central Board of Direct Taxes (CBDT) has recently introduced new tax rules for online gaming platforms in India. These rules aim to bring clarity and establish guidelines for Tax Deducted at Source (TDS) on winnings from 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.
  • This threshold provides relief for players with smaller winnings.
  • Bonus, referral bonus, and incentives provided by the online gaming company are considered taxable deposits.
  • These deposits will be subject to tax under Rule 133 of the Income-tax Act.
  • Calculation of net winnings in the online gaming industry will consider each user account separately when a user has multiple accounts.
  • The deposit, withdrawal, or balance in the user account refers to the total amount across all user accounts associated with the individual.
  • Transfers between user accounts under the same online intermediary, belonging to the same user, will not be treated as withdrawals or deposits.
  • However, if a withdrawal or deposit occurs between one user’s account and another user’s account, such transfers will be considered as withdrawals.
  • The valuation of winnings in kind will be based on the fair market value, except when the online gaming intermediary has purchased the winnings before providing them to the user.
  • If the online gaming intermediary manufactures items as winnings, the fair market value will be considered.
  • To regulate online gaming transactions, the Finance Act 2023 introduced section 194BA in the Income-tax Act, 1961, requiring online gaming platforms to deduct income tax on net winnings in a user’s account.
  • TDS at a rate of 30% will be applicable on the net winnings from any online gaming platform.
  • Tax is required to be deducted at the time of withdrawal and at the end of the financial year.