Method of Calculation of Net Winnings under Section 194BA

 In the for Financial Year 2023, a separate provision for the taxability of Online Games was introduced i.e., Section 194BA. This was much anticipated because of the current development seen in Online Gaming Industry and a number of Websites and Applications being introduced in the recent years offering Online Betting on various Sports. 

Section 194BA states that,

"Any person earning income from winnings from any online gaming, then the person who is responsible to pay such winnings shall be liable to deduct TDS from the NET WINNINGS of such person earning income."

Therefore, Central Government vide Notification G.S.R. 379(E). dated 22nd May, 2023 inserted Rule 133 with respect to calculation of Net Winnings. 

The Rule segregates the Point of Taxability into 3 stages,

1. FIRST TIME WITHDRAWAL
2. SUBSEQUENT WITHDRAWAL
3. AT THE END OF FINANCIAL YEAR

I. FIRST TIME WITHDRAWAL

The following Formula shall be used to compute the Net Winnings,

Net winnings =A-(B+C), where –

A = Amount withdrawn from the user account;
B = Aggregate amount of non-taxable deposit made in the user account by the owner of such account during the financial year, till the time of such withdrawal; and
C = Opening balance of the user account at the beginning of the financial year

II. SUBSEQUENT WITHDRAWAL

The following Formula shall be used to compute the Net Winnings,

Net winnings =A-(B+C+E), where –

A = Aggregate amount withdrawn from the user account during the financial year till the time of subsequent withdrawal including the amount of such subsequent withdrawal;
B = Aggregate amount of non-taxable deposit made in the user account by the owner of such account during the financial year, till the time of such subsequent withdrawal;
C = Opening balance of the user account at the beginning of the financial year; and
E= Net winnings comprised in the earlier withdrawal or withdrawals computed under sub-rule (2), or under this sub-rule, during the financial year till the time of subsequent withdrawal if tax has been deducted in accordance with the provision of section 194BA on winnings comprised in such withdrawal or withdrawals.

III. AT THE END OF FINANCIAL YEAR

The following Formula shall be used to compute the Net Winnings,

Net winnings =(A+D)-(B+C+E), where –

A = Aggregate amount withdrawn from the user account during the financial year;
B = Aggregate amount of non-taxable deposit made in the user account by the owner of such account during financial year;
C = Opening balance of the user account at the beginning of the financial year;
D= Closing balance of the user account at the end of the financial year; and
E= Net winnings comprised in the earlier withdrawal or withdrawals computed under sub-rule (2), or sub-rule (4), during the financial year if tax has been deducted in accordance with the provision of section 194BA on winnings comprised in such withdrawal or withdrawals.

The Rate of TDS will be 30%.

For the purpose of this rule, 

(a) “non-taxable deposit” means the amount deposited by the user in his user account and which is not taxable;

(b) “taxable deposit” means any amount deposited in the user account which is not a non-taxable deposit and

includes any amount paid directly to the user not through the user account; and

(c) “withdrawal” means any amount withdrawn by the user from any user account.

Please read the complete Notification on the given link:

https://incometaxindia.gov.in/communications/notification/notification-28-2023.pdf

Thanks for the Reading the Article :)



















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