The gaming platform deducted tax on my gross winnings from each game. Should it have been deducting on net winnings under s.194BA instead, and from when?
Section 194BA was inserted by the Finance Act, 2023 with effect from 1 April 2023 and, notwithstanding anything contained in any other provision of the Act, 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 payee's user account, computed in the manner prescribed, at the end of the financial year at the rates in force. Where there is a withdrawal from the user account during the year, deduction is at the time of withdrawal on the net winnings comprised in that withdrawal, as well as on the remaining net winnings in the user account computed in the prescribed manner at the end of the year — and from the same date the second proviso to s.194B takes online-game winnings out of s.194B altogether.
Decided by the CBDT Circulars & Instructions (Not applicable — statutory text) on 2023-04-01, reported as Section 194BA of the Income-tax Act, 1961, as amended up to 2024. It bears on section 194BA, section 194B, section 115BBJ, section 295 of the Income Tax Act 1961, in TDS Defaults, Crypto & Virtual Digital Assets and How Tax Law Is Read matters.
The whole design of this section is that it does not tax a gross prize. Deduction is on net winnings in the user account, and the unit of account is the account and the financial year, not the individual game. That is why the section has to open with a non obstante clause and why s.194B had to be shut off for online games on the same date: a platform still deducting on each gross win is over-withholding, and a platform deducting nothing until year end is under-withholding if there have been withdrawals. Three structural points that carry weight in a dispute. First, the section contains no threshold on its face — no ten thousand rupee figure, nothing — so any de minimis relief a platform is applying is coming from somewhere other than the section. Second, sub-section (2) puts the same in-kind burden on the payer as s.194B does, in the same words: where the net winnings are wholly in kind, or partly in cash and partly in kind and the cash is not enough to meet the tax on the whole, the payer must before releasing the winnings ensure that tax has been paid. Third, sub-sections (3) and (4) give the Board a power to issue guidelines to remove difficulties, and provide that every such guideline, once laid before each House of Parliament, is BINDING on the income-tax authorities and on the person liable to deduct — a materially stronger status than an ordinary circular, and the source of the guidance this library already carries as Circular No. 5 of 2023.
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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Sub-section (1): notwithstanding anything contained in any other provisions of this Act, any person responsible for paying to any person any income by way of winnings from any online game during the financial year shall deduct income-tax on the net winnings in his user account, computed in the manner as may be prescribed, at the end of the financial year at the rates in force. Proviso to sub-section (1): in a case where there is a withdrawal from the user account during the financial year, the income-tax shall be deducted at the time of such withdrawal on the net winnings comprised in such withdrawal, as well as on the remaining amount of net winnings in the user account, computed in the manner as may be prescribed, at the end of the financial year. Sub-section (2): 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. Sub-section (3): if any difficulty arises in giving effect to the section, the Board may, with the previous approval of the Central Government, issue guidelines for the purposes of removing the difficulty. Sub-section (4): every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person liable to deduct income-tax. The Explanation defines 'computer resource', 'internet' and 'online game' by reference to s.115BBJ, and defines 'online gaming intermediary' as an intermediary that offers one or more online games, 'user' as any person who accesses or avails any computer resource of an online gaming intermediary, and 'user account' as the account of a user registered with an online gaming intermediary.
From 1 April 2023, withholding on online-game winnings is on net winnings in the user account and not on gross prizes: at the end of the financial year, and additionally at the time of each withdrawal on the net winnings comprised in it. The section overrides all other provisions of the Act, contains no threshold on its face, obliges the payer to ensure tax is paid before releasing a winning in kind, and makes Board guidelines issued under sub-section (3) binding on the authorities and on the deductor once laid before Parliament. From the same date s.194B does not apply to winnings from an online game.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the commencement taken from the footnote apparatus on those pages. No judicial reasoning is involved.
Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person liable to deduct income-tax.
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Handle my notice → Ask a CA on WhatsAppSection 194BA was inserted by the Finance Act, 2023 with effect from 1 April 2023 and, notwithstanding anything contained in any other provision of the Act, 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 payee's user account, computed in the manner prescribed, at the end of the financial year at the rates in force. Where there is a withdrawal from the user account during the year, deduction is at the time of withdrawal on the net winnings comprised in that withdrawal, as well as on the remaining net winnings in the user account computed in the prescribed manner at the end of the year — and from the same date the second proviso to s.194B takes online-game winnings out of s.194B altogether. This was decided by the CBDT Circulars & Instructions (Not applicable — statutory text) and bears on section 194BA, section 194B, section 115BBJ, section 295 of the Income Tax Act 1961. It is reported as Section 194BA of the Income-tax Act, 1961, as amended up to 2024. The whole design of this section is that it does not tax a gross prize. Deduction is on net winnings in the user account, and the unit of account is the account and the financial year, not the individual game. That is why the section has to open with a non obstante clause and why s.194B had to be shut off for online games on the same date: a platform still deducting on each gross win is over-withholding, and a platform deducting nothing until year end is under-withholding if there have been withdrawals. Three structural points that carry weight in a dispute. First, the section contains no threshold on its face — no ten thousand rupee figure, nothing — so any de minimis relief a platform is applying is coming from somewhere other than the section. Second, sub-section (2) puts the same in-kind burden on the payer as s.194B does, in the same words: where the net winnings are wholly in kind, or partly in cash and partly in kind and the cash is not enough to meet the tax on the whole, the payer must before releasing the winnings ensure that tax has been paid. Third, sub-sections (3) and (4) give the Board a power to issue guidelines to remove difficulties, and provide that every such guideline, once laid before each House of Parliament, is BINDING on the income-tax authorities and on the person liable to deduct — a materially stronger status than an ordinary circular, and the source of the guidance this library already carries as Circular No. 5 of 2023. If it applies to you, the first step is this: Check which section the platform used. For winnings from an online game paid on or after 1 April 2023 the deduction is under s.194BA and not under s.194B, because the second proviso to s.194B disapplies that section from the same date.
Sub-section (1): notwithstanding anything contained in any other provisions of this Act, any person responsible for paying to any person any income by way of winnings from any online game during the financial year shall deduct income-tax on the net winnings in his user account, computed in the manner as may be prescribed, at the end of the financial year at the rates in force. Proviso to sub-section (1): in a case where there is a withdrawal from the user account during the financial year, the income-tax shall be deducted at the time of such withdrawal on the net winnings comprised in such withdrawal, as well as on the remaining amount of net winnings in the user account, computed in the manner as may be prescribed, at the end of the financial year. Sub-section (2): 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. Sub-section (3): if any difficulty arises in giving effect to the section, the Board may, with the previous approval of the Central Government, issue guidelines for the purposes of removing the difficulty. Sub-section (4): every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person liable to deduct income-tax. The Explanation defines 'computer resource', 'internet' and 'online game' by reference to s.115BBJ, and defines 'online gaming intermediary' as an intermediary that offers one or more online games, 'user' as any person who accesses or avails any computer resource of an online gaming intermediary, and 'user account' as the account of a user registered with an online gaming intermediary. The matter was decided on 2023-04-01 by the CBDT Circulars & Instructions (Not applicable — statutory text). On those facts the CBDT Circulars & Instructions held as follows. From 1 April 2023, withholding on online-game winnings is on net winnings in the user account and not on gross prizes: at the end of the financial year, and additionally at the time of each withdrawal on the net winnings comprised in it. The section overrides all other provisions of the Act, contains no threshold on its face, obliges the payer to ensure tax is paid before releasing a winning in kind, and makes Board guidelines issued under sub-section (3) binding on the authorities and on the deductor once laid before Parliament. From the same date s.194B does not apply to winnings from an online game.
Not applicable — this is a statement of the statutory text as printed on the departmental section pages, with the commencement taken from the footnote apparatus on those pages. No judicial reasoning is involved. In the words reproduced by the source cited on this page: "Every guideline issued by the Board under sub-section (3) shall, as soon as may be after it is issued, be laid before each House of Parliament, and shall be binding on the income-tax authorities and on the person liable to deduct income-tax."
It was decided by the CBDT Circulars & Instructions on 2023-04-01 and is reported as Section 194BA of the Income-tax Act, 1961, as amended up to 2024. 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 194B, section 115BBJ, section 295, 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. From 1 April 2023, withholding on online-game winnings is on net winnings in the user account and not on gross prizes: at the end of the financial year, and additionally at the time of each withdrawal on the net winnings comprised in it. The section overrides all other provisions of the Act, contains no threshold on its face, obliges the payer to ensure tax is paid before releasing a winning in kind, and makes Board guidelines issued under sub-section (3) binding on the authorities and on the deductor once laid before Parliament. From the same date s.194B does not apply to winnings from an online game. It arises in TDS Defaults, Crypto & Virtual Digital Assets and How Tax Law Is Read matters, on section 194BA, section 194B, section 115BBJ, section 295 of the Income Tax Act 1961, and was decided by Not applicable — statutory text. 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. Reconcile on the user account, not on individual games: net winnings in the account at year end, plus net winnings comprised in each withdrawal at the time of the withdrawal. Get the computation of net winnings from the prescribed manner — the section deliberately does not compute it, saying 'computed in the manner as may be prescribed' in both limbs — and satisfy yourself the platform has applied the prescribed rule and not its own formula. Check the definition boundary before conceding the section applies at all: 'computer resource', 'internet' and 'online game' take their meanings from s.115BBJ, and 'online gaming intermediary', 'user' and 'user account' are defined in the Explanation to s.194BA itself. Where the winnings are in kind, expect the platform to hold the prize until tax is paid — sub-section (2) obliges it to ensure tax has been paid before releasing the winnings, and it has no discretion to release against an undertaking. Treat a Board guideline issued under sub-section (3) as binding rather than persuasive once it has been laid before Parliament, and cite sub-section (4) when the Assessing Officer departs from it.
Still good law. Two separately published versions of the section print it identically and attribute it to the same Act and the same date, which is the strongest evidence available here that no later amendment has displaced it. No published version of section 194BA later than 2024 has been located, so an amendment made in 2025 or 2026 would not be visible on this material, and no Finance Act text has been read. One gap has to be stated at the front. The prescribed manner of computing net winnings has not been read, and nothing on this page states it. That is not a detail: the section charges deduction on 'net winnings … computed in the manner as may be prescribed', so the whole quantum of the obligation sits in the rule and not in the section. A deductor cannot work out what to deduct from this page alone. What the section itself does settle is the occasions of deduction and the boundary with section 194B. Deduction arises at the end of the financial year on the net winnings in the user account, and again on every withdrawal during the year, so it is not a single year-end event. And there is no threshold in section 194BA at all, which is a real departure from section 194B: a deductor who carries the ten thousand rupee line across from that section will under-deduct on almost every account. A practitioner should check which financial year is in issue, because section 194B ceased to reach online games only from 1 April 2023. 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.
The section is taken from the Department's own published text of the Income-tax Act, 1961, under the heading 'Section 194BA - Winnings from online games'. Two separately published versions print it word for word alike. One carries the footnote 'Inserted by the Finance Act, 2023, w.e.f. 1-4-2023' and the other 'Ins. by the Act No. 8 of 2023, w.e.f. 1-4-2023'. Those two footnotes together identify Act No. 8 of 2023 as the Finance Act, 2023, and fix the commencement date on two independent routes. The disapplication of section 194B to online games from 1 April 2023 is taken from the second proviso printed in the current text of that section. What could not be done matters here more than usual. The prescribed rule has not been read. The manner of computing net winnings is prescribed by rule 133 of the Income-tax Rules, 1962, and a reader looking for it should be warned that a rule bearing the same number exists in an entirely different instrument — rule 133 of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, headed 'Availability of issue material', which begins 'The lead manager(s) shall ensure availability of the offer document and other issue material including application forms to stock exchanges, syndicate members…'. That is not an Income-tax Rule and must not be used as one. The confusion is easy to fall into, and an entry or an advice built on it would be worthless. Nothing on this page therefore states the formula for net winnings, and no rate is stated either, because the section says only 'at the rates in force'. A reader who needs the formula should take it from the notification inserting rule 133, or from the Board's guidelines, which this library carries as CBDT Circular No. 5 of 2023. The decided_on field carries a commencement date and not a decision date: 1 April 2023, the date both published versions of the section give for its insertion. This is a statutory entry, there is no decision behind it, and it carries no bench and no result. 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.
From 1 April 2023, withholding on online-game winnings is on net winnings in the user account and not on gross prizes: at the end of the financial year, and additionally at the time of each withdrawal on the net winnings comprised in it. The section overrides all other provisions of the Act, contains no threshold on its face, obliges the payer to ensure tax is paid before releasing a winning in kind, and makes Board guidelines issued under sub-section (3) binding on the authorities and on the deductor once laid before Parliament. From the same date s.194B does not apply to winnings from an online game.
TaxSphere, “Statutory position — s.194BA: winnings from online games, net winnings, and where s.194B stops”, https://taxnotice.vittsphere.com/caselaw/case/statutory-position-194ba-online-game-winnings-net-winnings-and-the-boundary-with-194b/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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