Threshold for TDS levy on net winning from online gaming at Rs 100: CBDT

Tax is required to be deducted at the time of withdrawal as well as at the end of the financial year.

The Central Board of Direct Taxes (CBDT) has notified Rule 133 of the I-T Rules defining the manner and procedure for deduction of the TDS. Net winnings of an online gamer would be calculated after subtracting the total deposits and opening balance in the user account from the amount withdrawn.

To remove the difficulty in deducting tax at source under section 194BA of the Act for “insignificant withdrawal”, it is clarified that tax may not be deducted on withdrawal on the satisfaction of all of the following conditions (i) net winnings comprised in the amount withdrawn does not exceed Rs 100 in a month; (ii) tax not deducted on account of this concession is deducted at a time when the net winnings comprised in withdrawal exceeds Rs 100 in the same month or subsequent month or if there is no such withdrawal, at the end of the financial year; and (iii) the deductor undertakes the responsibility of paying the difference if the balance in the user account at the time of tax deduction under section 194BA of the Act is not sufficient to discharge the tax deduction liability calculated in accordance with Rule 133, the CBDT said.

Nangia Andersen LLP Tax Leader Aravind Srivatsan said the circular keeps the threshold limit for TDS or withholding tax at a sum of Rs 100 of net winnings arguably to keep a bigger monitor on unaccounted money flowing into this sector and keep a real-time vigil.

Transferring from one user account to another user account, maintained with the same online gaming intermediary of the same user shall not be considered as withdrawal or deposit, as the case may be.

Srivatsan said though this circular the government has looked at various aspects involved in the gaming business, including reward points, gifts in kind, and referral bonuses and addressed the withholding tax mechanisms.

“Users with multiple accounts across gaming companies may note that having multiple accounts would not spare them from withholding since the rules are clear on the need to consolidate common user details,” Srivatsan added.