In India, the trend for online gaming is booming, especially among the youth, who are passionately pursuing it. From just playing it for fun to opting for it as a full-time career, the online gaming industry has come a long way. A large number of individuals participate in fantasy leagues, card games, online challenges, etc., which involve actual money. To cover this gaming business under the Income Tax Act, a separate section, i.e., 194BA has been introduced in the Union Budget 2023. This section will be applicable from 1st July 2023.
Applicability of Section 194BA
Section 194BA states that if any person receives any income by way of winning from any online game during the financial year then the person responsible for paying such income shall deduct TDS from the net winnings at the end of the financial year. However, in a case where a user withdraws the amount during the financial year then the tax shall be deducted at the time of such withdrawal from the net winnings.
Also, In a case where the net winnings are partly in cash, partly in kind, or wholly in kind and the cash is not sufficient to meet the tax liability of deduction from net winning, then the person responsible for paying such income shall ensure that before releasing the winnings the tax has been paid in respect of the net winnings.
Purpose of Section 194BA
The purpose of introducing this section is to cover all the online games in a separate section. Previously, such winnings from online games were taxable under Section 194B. However, Budget 2023 introduced a new section for the same, and hence, from 1st July 2023, if you receive any winnings from online games, then it will be taxable under Section 194BA.
Rate of TDS under section 194BA
The payer shall deduct TDS at the rate of 30% from the net winnings of the user account. The payer shall deduct tax either during the financial year in case of withdrawal or at the end of the financial year. There is no threshold limit on the amount, and the tax will be deducted from the entire net winning amount.
Let’s understand this with the help of an example:
Shyam is participating in online gaming Dream 11. Further, he won INR 1,00,000 as the net winning amount during the financial year. Now, Dream 11 will deduct TDS at the rate of 30% on the total amount i.e., INR 30,000 (1,00,000*30%). The TDS will be deducted at the end of the financial year, irrespective of whether Shyam has withdrawn the amount or not.
Due Date to deposit TDS u/s 194BA
| Particulars | Due Date |
| If the amount is credited in a month other than March | Within 7 days from the end of the month in which deduction is made |
| If the amount is credited in the month of March | On or before 30th April |
TDS Return
If the payer has deducted tax on the net winning amount under section 194BA, then the payer will be responsible to file a quarterly return of TDS in Form 26Q within the due date.
TDS Certificate
The payer shall issue a certificate in Form 16A to the user whose tax has been deducted from online games. The payer can download the form from the TRACES account.
FAQs
No, there is no threshold limit for a tax deduction on the winning amount. The payer shall deduct tax on the entire net winning amount at the rate of 30%.
Section 194B is for a tax deduction on winning from the lottery and the crossword puzzle. While section 194BA is for a tax deduction on winning from online games.
If the person has received the winning in kind then it is the responsibility of the payer to either demand cash from the user or withholds the cash amount of the user if any.
Hey @Kishor_Raut,
TDS at the rate of 30% is applicable on winnings from such online games. This TDS is applicable when you withdraw your winnings and transfer them to your bank account. Moreover, if you do not withdraw the winnings before the end of the financial year, then TDS will be deducted even if you do not withdraw your winnings.
If TDS was deducted, you will have to report your winnings while filing the ITR.
Hope this helps!