The Income Tax department has recently released guidelines regarding Tax Deducted at Source (TDS) for online gaming platforms. These guidelines aim to establish a threshold for deducting tax from winnings obtained through online gaming.
Threshold for Tax Deduction
According to the new guidelines, online gaming platforms will be required to deduct tax from a player’s winnings if the net winnings exceed Rs 100. However, if a player’s net winnings do not exceed Rs 100, online gaming platforms are not obligated to deduct tax at the source.
Introduction of Section 194BA
To enforce the tax deduction on online gaming winnings, the government introduced a new section, 194BA, in the Income-tax Act, 1961, through the Finance Act, 2023. This section mandates online gaming platforms to deduct income tax on the net winnings in a user’s account.
Calculation of Net Winnings
To calculate the net winnings of an online gamer, the total deposits and opening balance in the user account are subtracted from the amount withdrawn. This calculation helps determine whether the threshold for tax deduction has been reached.
Optional Deposit of Tax Amounts
The circular issued by the Income Tax department also mentions that gaming companies have the option to deposit tax amounts for the month of April. If they haven’t done so already, they can deposit the tax dues for April along with the dues for May by June 7. This provision helps gaming companies avoid any penal consequences.
The new guidelines introduced by the Income Tax department aim to regulate the taxation of online gaming winnings. By setting a threshold of Rs 100 for tax deduction, the department ensures that smaller winnings are exempt from tax deductions. Gaming companies have the responsibility to deduct income tax from players’ net winnings based on the prescribed rules and regulations.
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