NEW DELHI: Online gaming platforms need not deduct tax at source on winnings withdrawn by players if the amount is less than ₹100 a month and meets certain riders, the Central Board of Direct Taxes (CBDT) said in a set of guidelines issued on Monday.
CBDT said the guidelines were issued to remove difficulties for the tax payers.
As per this, net winnings below ₹100 in a month will not be subject to tax deducted at source (TDS) at the time of withdrawal provided the tax liability will be deducted when the net winnings withdrawn exceeds this limit in the same or the subsequent month or at the end of the fiscal year.
Also, to be eligible for this concession, the tax diductor has to undertake the responsibility of paying the difference if the balance in the user account is not sufficient to meet the tax liability at the time of deduction, CBDT explained in the guidelines.
The concession is offered as a practical solution to deal with the large number of gamers who play with very insignificant amount and also withdraw very small amount, which could make tax deduction at source a big compliance burden for the online gaming company.
As per section 194BA of the Income Tax Act, online gaming companies paying to any person any income by way of winnings during the financial year, should deduct income-tax on the net winnings in his user account.
If the money in the user account is used to buy an item in kind and given to user, then it is to be treated as net winnings in cash and tax is to be deducted at source. Where the net winnings are wholly in kind or partly in cash, and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax, the gaming company should ensure that tax has been paid in respect of the net winnings, before releasing the winnings.
The guidelines also said that for a deposit in the user account to be treated as non-taxable, it is necessary that the amount deposited is from already taxed income or it is not chargeable to tax. In a case where user borrows the money and deposit in his user account, it shall be considered as non-taxable deposit, explained the guidelines.
Bonus, referral bonus, incentives etc are given by the online game intermediary to the user. They are to be considered as taxable deposit. The taxable deposit will increase the balance in user account and is not allowed to be deducted in calculation of net winnings as only non-taxable deposits are allowed to be deducted, the guidelines explained.
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