The platform says it need not deduct on every small withdrawal, and that my bonus counts as a deposit. Where does that come from?
It comes from this circular, issued under s.194BA(3) on the same day Rule 133 was notified. It allows the deductor to skip deduction on a withdrawal where the net winnings in it do not exceed Rs 100 in a month, provided the tax is picked up later and the deductor stands behind it; it treats a bonus, referral bonus or incentive as a taxable deposit, unless it is credited only for playing and cannot be withdrawn; it requires every user account of the same user on a platform to be aggregated; and it fixes how winnings in kind are valued, excluding GST.
Decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, TPL Division — F. No. 370142/12/2023-TPL, signed by Mrinalini Kaur Sapra, Director TPL III) on 2023-05-22, reported as Circular No. 5 of 2023 dated 22 May 2023. It bears on section 194BA, section 194BA(2), section 194BA(3), section Rule 133 of the Income Tax Act 1961, in TDS Defaults and Assessment & Scrutiny matters.
Section 194BA has no threshold at all, so on the bare section a platform would have to deduct on a Rs 20 withdrawal. The circular is the only thing that makes the section administrable, and because it is issued under sub-section (3) it is binding on the income-tax authorities and on the deductor by force of sub-section (4). A platform that departs from it is not taking a view; it is in default.
Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them.
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Section 194BA was inserted by the Finance Act 2023 with effect from 1 April 2023. It requires a person paying income by way of winnings from any online game during the financial year to deduct tax on the net winnings in the person's user account, at the time of withdrawal and again at the end of the financial year, net winnings being computed in the prescribed manner. That manner was prescribed in Rule 133 of the Income-tax Rules 1962 by Notification No. 28/2023 [G.S.R. 379(E), F. No. 370142/12/2023-TPL] of 22 May 2023, the Income-tax (Fifth Amendment) Rules 2023. The Board issued this circular the same day under s.194BA(3), which authorises it, with the previous approval of the Central Government, to issue guidelines for the removal of difficulties. The circular records that the guidelines are required to be laid before each House of Parliament and are binding on the income-tax authorities and on the person liable to deduct income-tax. It is written as eight questions and answers.
The Board answered eight questions. (1) Every wallet that qualifies as a user account is a user account, and where a user has several user accounts under the same deductor - the same TAN - deposits, withdrawals and balances in all of them are aggregated for the Rule 133 formula; a transfer between two user accounts of the same user with the same intermediary is neither a withdrawal nor a deposit. Where one deductor runs several platforms and integrating accounts across them is not technologically feasible, he may at his option compute separately for each platform, but must then treat a transfer across platforms as a withdrawal or a deposit. (2) Money the user borrows and deposits is a non-taxable deposit. (3) A bonus, referral bonus or incentive is a taxable deposit and so forms part of net winnings; a deposit in money's worth such as coins, coupons, vouchers or counters is a taxable deposit at its money equivalent; but an incentive credited only for playing, which cannot be withdrawn or used otherwise, is ignored altogether - excluded from non-taxable deposits and from the opening and closing balance - though the deductor must keep separate accounts of it, and if it is later recharacterised as withdrawable it becomes a taxable deposit in the year of recharacterisation. (4) A transfer out of the user account to any account not registered with the intermediary is a withdrawal, and so is the issue of coupons for goods or services, or of an item in kind, against the balance; tax must be deducted before such coupons or items are issued. (5) Tax may be left undeducted on an insignificant withdrawal only if all three conditions are satisfied: the net winnings comprised in the withdrawal do not exceed Rs 100 in a month; the tax so left undeducted is deducted when net winnings comprised in a withdrawal exceed Rs 100 in that or a later month, or, failing any such withdrawal, at the end of the financial year; and the deductor undertakes to pay the difference if the balance in the user account is insufficient. (6) Where money in the user account is used to buy an item that is then given to the user, the net winnings are in cash and tax is deducted accordingly; where the winning itself is a prize in kind, s.194BA(2) applies and the deductor must ensure tax has been paid before releasing the winnings, releasing them on proof of payment such as challan details, with reporting in Form 26Q - or, as an option, may himself deduct and pay the tax and show it in Form 26Q. (7) Winnings in kind are valued at fair market value, except that where the intermediary purchased the item the purchase price is the value and where it manufactures the item the price charged to its customers is the value; GST is excluded from the valuation. (8) Deductors were expected to deduct from 1 April 2023 even before the Rule and the guidelines issued, but a shortfall for April 2023 caused by that time lag could be deposited along with the deduction for May 2023 by 7 June 2023 without penal consequences.
The circular does not reason in the way a judgment does. It recites that s.194BA(3) authorises the Board to issue guidelines for the removal of difficulties with the previous approval of the Central Government, that the guidelines must be laid before each House of Parliament, and that they bind both the income-tax authorities and the person liable to deduct, and then works through the practical difficulties the section throws up - multiple wallets, borrowed money, promotional credits, what counts as a withdrawal, very small withdrawals, prizes that are not money, valuation, and the gap between the section commencing on 1 April 2023 and the guidelines issuing on 22 May 2023. Two ideas run through the answers. The first is that the user account, not the transaction, is the unit of account: a movement inside the user's own accounts with one intermediary changes nothing, and it is a movement out of them that triggers deduction. The second is that a credit is taxable unless it is money the user has already been taxed on or that is not chargeable, which is why promotional credits are taxable deposits and borrowed money is not, and why a credit locked to play is left out of the computation until it can be taken out.
Sub-section (3) of section 194BA of the Act authorises Central Board of Direct Taxes (CBDT) to issue guidelines, for the purposes of removal of difficulties with the previous approval of the Central Government.
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Handle my notice → Ask a CA on WhatsAppIt comes from this circular, issued under s.194BA(3) on the same day Rule 133 was notified. It allows the deductor to skip deduction on a withdrawal where the net winnings in it do not exceed Rs 100 in a month, provided the tax is picked up later and the deductor stands behind it; it treats a bonus, referral bonus or incentive as a taxable deposit, unless it is credited only for playing and cannot be withdrawn; it requires every user account of the same user on a platform to be aggregated; and it fixes how winnings in kind are valued, excluding GST. This was decided by the CBDT Circulars & Instructions (Central Board of Direct Taxes, TPL Division — F. No. 370142/12/2023-TPL, signed by Mrinalini Kaur Sapra, Director TPL III) and bears on section 194BA, section 194BA(2), section 194BA(3), section Rule 133 of the Income Tax Act 1961. It is reported as Circular No. 5 of 2023 dated 22 May 2023. Section 194BA has no threshold at all, so on the bare section a platform would have to deduct on a Rs 20 withdrawal. The circular is the only thing that makes the section administrable, and because it is issued under sub-section (3) it is binding on the income-tax authorities and on the deductor by force of sub-section (4). A platform that departs from it is not taking a view; it is in default. If it applies to you, the first step is this: Read the circular with Rule 133 open beside it — the circular answers questions about the rule and does not restate it.
Section 194BA was inserted by the Finance Act 2023 with effect from 1 April 2023. It requires a person paying income by way of winnings from any online game during the financial year to deduct tax on the net winnings in the person's user account, at the time of withdrawal and again at the end of the financial year, net winnings being computed in the prescribed manner. That manner was prescribed in Rule 133 of the Income-tax Rules 1962 by Notification No. 28/2023 [G.S.R. 379(E), F. No. 370142/12/2023-TPL] of 22 May 2023, the Income-tax (Fifth Amendment) Rules 2023. The Board issued this circular the same day under s.194BA(3), which authorises it, with the previous approval of the Central Government, to issue guidelines for the removal of difficulties. The circular records that the guidelines are required to be laid before each House of Parliament and are binding on the income-tax authorities and on the person liable to deduct income-tax. It is written as eight questions and answers. The matter was decided on 2023-05-22 by the CBDT Circulars & Instructions (Central Board of Direct Taxes, TPL Division — F. No. 370142/12/2023-TPL, signed by Mrinalini Kaur Sapra, Director TPL III). On those facts the CBDT Circulars & Instructions held as follows. The Board answered eight questions. (1) Every wallet that qualifies as a user account is a user account, and where a user has several user accounts under the same deductor - the same TAN - deposits, withdrawals and balances in all of them are aggregated for the Rule 133 formula; a transfer between two user accounts of the same user with the same intermediary is neither a withdrawal nor a deposit. Where one deductor runs several platforms and integrating accounts across them is not technologically feasible, he may at his option compute separately for each platform, but must then treat a transfer across platforms as a withdrawal or a deposit. (2) Money the user borrows and deposits is a non-taxable deposit. (3) A bonus, referral bonus or incentive is a taxable deposit and so forms part of net winnings; a deposit in money's worth such as coins, coupons, vouchers or counters is a taxable deposit at its money equivalent; but an incentive credited only for playing, which cannot be withdrawn or used otherwise, is ignored altogether - excluded from non-taxable deposits and from the opening and closing balance - though the deductor must keep separate accounts of it, and if it is later recharacterised as withdrawable it becomes a taxable deposit in the year of recharacterisation. (4) A transfer out of the user account to any account not registered with the intermediary is a withdrawal, and so is the issue of coupons for goods or services, or of an item in kind, against the balance; tax must be deducted before such coupons or items are issued. (5) Tax may be left undeducted on an insignificant withdrawal only if all three conditions are satisfied: the net winnings comprised in the withdrawal do not exceed Rs 100 in a month; the tax so left undeducted is deducted when net winnings comprised in a withdrawal exceed Rs 100 in that or a later month, or, failing any such withdrawal, at the end of the financial year; and the deductor undertakes to pay the difference if the balance in the user account is insufficient. (6) Where money in the user account is used to buy an item that is then given to the user, the net winnings are in cash and tax is deducted accordingly; where the winning itself is a prize in kind, s.194BA(2) applies and the deductor must ensure tax has been paid before releasing the winnings, releasing them on proof of payment such as challan details, with reporting in Form 26Q - or, as an option, may himself deduct and pay the tax and show it in Form 26Q. (7) Winnings in kind are valued at fair market value, except that where the intermediary purchased the item the purchase price is the value and where it manufactures the item the price charged to its customers is the value; GST is excluded from the valuation. (8) Deductors were expected to deduct from 1 April 2023 even before the Rule and the guidelines issued, but a shortfall for April 2023 caused by that time lag could be deposited along with the deduction for May 2023 by 7 June 2023 without penal consequences.
The circular does not reason in the way a judgment does. It recites that s.194BA(3) authorises the Board to issue guidelines for the removal of difficulties with the previous approval of the Central Government, that the guidelines must be laid before each House of Parliament, and that they bind both the income-tax authorities and the person liable to deduct, and then works through the practical difficulties the section throws up - multiple wallets, borrowed money, promotional credits, what counts as a withdrawal, very small withdrawals, prizes that are not money, valuation, and the gap between the section commencing on 1 April 2023 and the guidelines issuing on 22 May 2023. Two ideas run through the answers. The first is that the user account, not the transaction, is the unit of account: a movement inside the user's own accounts with one intermediary changes nothing, and it is a movement out of them that triggers deduction. The second is that a credit is taxable unless it is money the user has already been taxed on or that is not chargeable, which is why promotional credits are taxable deposits and borrowed money is not, and why a credit locked to play is left out of the computation until it can be taken out. In the words reproduced by the source cited on this page: "Sub-section (3) of section 194BA of the Act authorises Central Board of Direct Taxes (CBDT) to issue guidelines, for the purposes of removal of difficulties with the previous approval of the Central Government."
It was decided by the CBDT Circulars & Instructions on 2023-05-22 and is reported as Circular No. 5 of 2023 dated 22 May 2023. Binding on the department, not on the assessee or the courts. An assessee may rely on a circular that is beneficial to them. A CBDT circular or instruction binds officers of the department but not the assessee and not the courts. Where a circular helps you, you may hold the department to it. Where it hurts you, it cannot override the Act or a judgment. On section 194BA, section 194BA(2), section 194BA(3), section Rule 133, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The Board answered eight questions. (1) Every wallet that qualifies as a user account is a user account, and where a user has several user accounts under the same deductor - the same TAN - deposits, withdrawals and balances in all of them are aggregated for the Rule 133 formula; a transfer between two user accounts of the same user with the same intermediary is neither a withdrawal nor a deposit. Where one deductor runs several platforms and integrating accounts across them is not technologically feasible, he may at his option compute separately for each platform, but must then treat a transfer across platforms as a withdrawal or a deposit. (2) Money the user borrows and deposits is a non-taxable deposit. (3) A bonus, referral bonus or incentive is a taxable deposit and so forms part of net winnings; a deposit in money's worth such as coins, coupons, vouchers or counters is a taxable deposit at its money equivalent; but an incentive credited only for playing, which cannot be withdrawn or used otherwise, is ignored altogether - excluded from non-taxable deposits and from the opening and closing balance - though the deductor must keep separate accounts of it, and if it is later recharacterised as withdrawable it becomes a taxable deposit in the year of recharacterisation. (4) A transfer out of the user account to any account not registered with the intermediary is a withdrawal, and so is the issue of coupons for goods or services, or of an item in kind, against the balance; tax must be deducted before such coupons or items are issued. (5) Tax may be left undeducted on an insignificant withdrawal only if all three conditions are satisfied: the net winnings comprised in the withdrawal do not exceed Rs 100 in a month; the tax so left undeducted is deducted when net winnings comprised in a withdrawal exceed Rs 100 in that or a later month, or, failing any such withdrawal, at the end of the financial year; and the deductor undertakes to pay the difference if the balance in the user account is insufficient. (6) Where money in the user account is used to buy an item that is then given to the user, the net winnings are in cash and tax is deducted accordingly; where the winning itself is a prize in kind, s.194BA(2) applies and the deductor must ensure tax has been paid before releasing the winnings, releasing them on proof of payment such as challan details, with reporting in Form 26Q - or, as an option, may himself deduct and pay the tax and show it in Form 26Q. (7) Winnings in kind are valued at fair market value, except that where the intermediary purchased the item the purchase price is the value and where it manufactures the item the price charged to its customers is the value; GST is excluded from the valuation. (8) Deductors were expected to deduct from 1 April 2023 even before the Rule and the guidelines issued, but a shortfall for April 2023 caused by that time lag could be deposited along with the deduction for May 2023 by 7 June 2023 without penal consequences. It arises in TDS Defaults and Assessment & Scrutiny matters, on section 194BA, section 194BA(2), section 194BA(3), section Rule 133 of the Income Tax Act 1961, and was decided by Central Board of Direct Taxes, TPL Division — F. No. 370142/12/2023-TPL, signed by Mrinalini Kaur Sapra, Director TPL III. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For a platform, document the Rs 100 monthly test withdrawal by withdrawal, and record the undertaking to pay the tax if the user account balance later proves insufficient. Treat a bonus, referral bonus or incentive credited to the user account as a taxable deposit, and keep separate the non-withdrawable credits that are excluded until they become withdrawable. Aggregate every user account of the same user on the platform before computing net winnings; keep the technical note if you are computing platform by platform. For winnings in kind, value on the circular's basis, exclude GST, and collect the challan or deduct and pay before the prize leaves your hands.
Still good law. The circular was read in full from the text carried in a subscription research database, which reproduces it under its file number and date and carries no 'as corrected by' annotation against it. Nothing modifying or withdrawing it was located, and no later guideline under s.194BA(3) was found. The provision it interprets survives the recodification: the Income-tax Act 2025 carries the deduction on winnings from online games at serial number 2 of the Table to s.393(3), payable by any person at rates in force, with Note 1 to that Table reproducing the s.194BA(1) mechanism - deduction on the net winnings in the user account at the end of the tax year and, on any withdrawal during the year, on the net winnings comprised in it as well as on what remains at year end, computed as prescribed - and Note 2 reproducing the s.194BA(2) rule for winnings wholly or partly in kind. What has not been established is whether the 2025 Act carries a guideline-making power answering to s.194BA(3), and so whether these guidelines carry forward as guidelines rather than as an aid to construction; the sub-sections of s.393 beyond sub-section (5) were not read. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This is a CBDT circular, not a decision. It is written as eight questions and answers, and all eight are now recorded above from its own text. Three points are easy to get wrong. First, the Rs 100 monthly relief is a deferral of deduction and not an exemption from tax, and it is available only if all three of its conditions are met, including the deductor's undertaking to make good any shortfall in the user account - a deductor who takes the relief without giving that undertaking has simply failed to deduct. Second, the aggregation of wallets is per deductor: it operates across every user account of the same user held with one TAN, not across intermediaries, and the relaxation for a deductor running several platforms is an option he may exercise, at the price of treating cross-platform transfers as withdrawals and deposits. Third, an intermediary that gives a promotional credit which can only be played with must keep separate accounts of it, because it is left out of net winnings only for so long as it cannot be withdrawn. The charge on the winnings themselves is under s.115BBJ; the circular does not mention that section and says nothing that reduces the charge. The circular addresses the deductor's position and not the player's: it says nothing about how net winnings computed under Rule 133 for deduction relate to the amount charged under s.115BBJ in the player's own assessment, and nothing about set-off or carry-forward of losses on a platform. The Rs 100 monthly test is expressed per deductor, and the circular does not say what a user who withdraws small sums from several unconnected intermediaries in the same month is to do. It does not deal with an offshore platform that is not an online gaming intermediary answerable in India, nor with the consequences of a deductor who takes the insignificant-withdrawal relief and then cannot recover the tax from a user who has closed the account. Whether the guidelines carry forward under the Income-tax Act 2025 is not addressed anywhere in the instrument, which necessarily predates it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Board answered eight questions. (1) Every wallet that qualifies as a user account is a user account, and where a user has several user accounts under the same deductor - the same TAN - deposits, withdrawals and balances in all of them are aggregated for the Rule 133 formula; a transfer between two user accounts of the same user with the same intermediary is neither a withdrawal nor a deposit. Where one deductor runs several platforms and integrating accounts across them is not technologically feasible, he may at his option compute separately for each platform, but must then treat a transfer across platforms as a withdrawal or a deposit. (2) Money the user borrows and deposits is a non-taxable deposit. (3) A bonus, referral bonus or incentive is a taxable deposit and so forms part of net winnings; a deposit in money's worth such as coins, coupons, vouchers or counters is a taxable deposit at its money equivalent; but an incentive credited only for playing, which cannot be withdrawn or used otherwise, is ignored altogether - excluded from non-taxable deposits and from the opening and closing balance - though the deductor must keep separate accounts of it, and if it is later recharacterised as withdrawable it becomes a taxable deposit in the year of recharacterisation. (4) A transfer out of the user account to any account not registered with the intermediary is a withdrawal, and so is the issue of coupons for goods or services, or of an item in kind, against the balance; tax must be deducted before such coupons or items are issued. (5) Tax may be left undeducted on an insignificant withdrawal only if all three conditions are satisfied: the net winnings comprised in the withdrawal do not exceed Rs 100 in a month; the tax so left undeducted is deducted when net winnings comprised in a withdrawal exceed Rs 100 in that or a later month, or, failing any such withdrawal, at the end of the financial year; and the deductor undertakes to pay the difference if the balance in the user account is insufficient. (6) Where money in the user account is used to buy an item that is then given to the user, the net winnings are in cash and tax is deducted accordingly; where the winning itself is a prize in kind, s.194BA(2) applies and the deductor must ensure tax has been paid before releasing the winnings, releasing them on proof of payment such as challan details, with reporting in Form 26Q - or, as an option, may himself deduct and pay the tax and show it in Form 26Q. (7) Winnings in kind are valued at fair market value, except that where the intermediary purchased the item the purchase price is the value and where it manufactures the item the price charged to its customers is the value; GST is excluded from the valuation. (8) Deductors were expected to deduct from 1 April 2023 even before the Rule and the guidelines issued, but a shortfall for April 2023 caused by that time lag could be deposited along with the deduction for May 2023 by 7 June 2023 without penal consequences.
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