Section 194BA – TDS on Online Gaming Winnings

Section 194BA

Any person who is responsible for paying any amount to the person winning online games during the financial year is liable to deduct the TDS on net winnings at the time of withdrawn or ending of financial year under Income Tax act, 1961

1. Payer (online gaming intermediary) – Any person responsible for paying income by way of such winnings from any online game.
2. Payee – Any Person whether Resident or non-resident, who play online games.

Here some Online games which cover in Section 194BA like dream11, My11circle, PokerStars, Adda52, Mobile premier league (MPL), Rummy Circle etc.

Winnings from online games is taxable under the heading of 'Income from other sources' under Sections 115BBJ. Under section 194BA, TDS is deducted on net winnings from the user's online gaming account @ 30 % without any limit.

After Circular and notification dated May 22, 2023. on TDS Section - 194BA--> income tax section - 115BBJ--> No threshold limit for TDS deduction.

Threshold limit for TDS

On the ‘Net winnings’ in a person’s user account as computed in prescribed manner.

Net Winnings = A – (B + C)

Were,

1. A = Amount withdrawn from the user account.
2. B = Aggregate amount of deposit made in the account by the user until the time of withdrawal
3. C = Opening balance of the user account at the start of the financial year.

Note – 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 in respect of whole of the net winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings.

Meaning of Certain terms 

1. Online gaming intermediary – An intermediary that offer one or more online games.
2. User – Any person who accesses or avails any computer resource of an online intermediary
3. User Account – Account of a user registered with an online gaming intermediary.

USER ACCOUNT
Opening Balance	XXX
(+) Joining Bonus (Non-Taxable Deposit)	XXX
(+) Deposit (Taxable Deposit)	XXX
(+) Winning	XXX
(-) Withdraw	(XXX)
(-) Loss	(XXX)
Closing Balance	XYZ

Let understand with the simple examples –

Case 1 –

• Opening Balance = Rs. 80,000
• Deposit= Rs. 20,000
• Withdraw = Rs. 50,000
• TDS on net winning = A - (B + C) = 50,000 – (20,000 + 80,000) = Rs. - 50,000, so no TDS is deducted in this case.

Case 2 –

• Opening Balance = Rs. 0
• Joining Bonus = Rs. 5,000
• Deposit = Rs. 25,000
• Deposit = Rs. 25,000
• Withdraw = Rs. 70,000
• TDS on net winning = A - (B + C) = 70,000 (25,000 + 25,000 + 0)  = Rs. 20,000 @ 30% TDS is deducted.

Rate of TDS

The application withdrawal rate of TDS shall be 30% of the amount withdrawal of Net Winning Money (without threshold limit).

Time of Deduction 

At the end of the financial year, in case there is withdrawal from user account during the financial year, tax would be deducted at the time of such withdrawal on net winnings comprised in such withdrawal. In addition, tax would also be deducted on the remaining amount of net winnings in the user account as computed in prescribed manner at the end of the financial year.

How to Calculation is done in Section 194BA.

This User account Statement of Mr. X, lets check how to calculated the TDS deduction undersection 194BA.

DATE	TRANSACTION	DEPOSIT	WITHDRAW
02-04-2024	Deposit	20,000
13-05-2024	Withdraw		40,000
16-06-2024	Deposit	15,000
01-08-2024	Bonus	8,000
15-09-2024	Withdraw		55,000
28-10-2024	Deposit	30,000
02-02-2025	Withdraw		65,000

Here,

1. Opening balance of Rs. 50,000
2. Closing balance of Rs. 80,000

Solution - 

1. First Withdrawal on 13th May 2024 = 40,000 – (20,000 + 50,000) = -20,000 so, No TDS 
2. Second Withdrawal on 15th November 2024 = (40,000+ 55,000) - (20,000 + 50,000 +15,000) = Rs. 10,000 @ 30% i.e., Rs. 3,000 TDS deducted 
3. Third Withdrawal on 2nd February 2025 = (40,000+ 55,000 + 65,000) - (20,000 + 50,000 +15,000 + 30,000 +10,000) = Rs 35,000@ 30% i.e., Rs 10,500 TDS deducted. 
4. Year Ending 31st March 2015 = (40,000+ 55,000 + 65,000 + 80,000) - (20,000 + 50,000 +15,000 + 30,000 +10,000 + 35,000) = Rs 80,000 @30% i.e., Rs. 24,000

Important Point to remember 

1. Multiple User Account – Each user account shall be considered for withdrawal or deposit.
2. Transfer from one user account to another user account – shall not be considered as withdrawal or deposit
3. Payment in cash or kind which is not from user account – Net Winning –= Value of Kind.
4. Taxable deposit in the form of bonus, referral bonus, incentives, promotional money, discount, by whatever name called – if user borrows some money and deposit in his account shall be considered as non-taxable deposits.
5. Relaxation – where net winnings does not exceed Rs. 100.

Income tax on wining from online games (Sec 115BBJ)

1. Income from other source
2. Taxable at flat rate of 30% + Surcharge plus + 4% Cess
3. No expenditure or allowance can be allowed 
4. Deduction under Chapter VI A is not allowed
5. Adjustment of unexhausted basic exemption limit is not allowed
6. Rebate benefit under section 87A is not allowed

Net winning for the purpose of sec 115BBJ

• Opening Balance – Rs. 40,000
• Deposit – Rs. 60,000
• Withdraw – Rs. 1,80,0000
• Closing balance – Rs.90,000
• Net Winning – (1,80,000 + 90,000) – (40,000 +60,000) = Rs. 1,70,000.
• Rs. 1,70,000 + Surcharge if applicable   + 4 % education cess.
• Deducted TDS by deductor will show in 26AS and Annual Information System (AIS).

Deposit of TDS & TDS Return Date

Tax deducted by an office of government

1. Without an income tax challan – deposit on the same day
2. With an income tax challan – deposit within 7 days from the end of the month in which the deduction is made.

Other deductors 

• If credited or paid in march – 30th April.
• Any other month within 7 days from the end of the month in which the deduction is made.

Quarterly Statement filing (Rule 31A)

Payer must submit a quarterly statement (Form 26Q) for tax deducted at source.

Quarter Ending	Due date
30th June	31st July
30th September	31st October
31st December	31st January
31st March	31st May

Furnishing certificate of TDS (Rule 31)

Form 16A – within 15 days from the due date for furnishing TDS statement.

Conclusion 

Section 194BA represents a significant step towards modernizing our tax framework in response to the rise of digital assets. By fostering transparency and accountability, this regulation not only benefits the government but also contributes to a more stable and trustworthy digital economy. Let us embrace these changes and work together to ensure a compliant and prosperous future.

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