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Economy
Mahesh

27/05/23 06:24 AM IST

New rules for computation of tax on winnings from online gaming

In News
  • Central Board of Direct Taxes (CBDT) has amended Income Tax rules to streamline and standardize the calculation and reporting of winnings from online gaming to improve tax compliance.
New Changes
  • The new rule said that net taxable winning in a year would be the difference between the sum of amount withdrawn from the user account and the closing balance and the sum of non- taxable deposits made in the user account and the opening balance.
  • The rule also prescribes formulas for tax to be deducted at source (TDS) at various stages such as first and subsequent withdrawals from the user account.
  • The new rules also define terms like non-taxable deposit in the user account such as borrowed amounts deposited in it.
  • The rules also define the taxability of bonus, referral bonus and incentives etc.
  • As per this, online gaming platforms need not deduct tax at source on winnings withdrawn by players if the amount is less than ₹100 a month and meets certain riders.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 guidelines had made it clear that 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deducted at source (TDS) at the time of withdrawal provided the tax liability will be deducted when the net winnings withdrawn exceeds this limit in the same or the subsequent month or at the end of the fiscal year.
Impact
  • Impact on professional gamers and streamers, potentially higher taxes and more complex financial management.
  • Esports organizations may need to adjust financial models and consider tax implications for revenue streams.
  • Financial implications and potential reduction in gaming income.
  • Compliance challenges in understanding and adhering to new tax rules.
CBDT
  • It is a statutory authority that functions under the Central Board of Revenue Act, 1963.
  • It is a part of the Department of Revenue in the Ministry of Finance.
  • It provides inputs for policy and planning of direct taxes in India and is also responsible for the administration of direct tax laws through the Income Tax Department.
  • Direct Taxes include income tax, corporation tax etc.
Source- LiveMint

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