Net Winnings From Online Games: Calculation Prescribed By CBDT!

Recently, the Central Board of Direct Taxes ("CBDT") has issued rules to calculate "net winnings" in case of online games and issued guidelines in relation to the same for further clarification. As background, the Finance Act, 2023 introduced a new provision under the Income Tax Act, 1961 ("Act") – Section 194BA (applicable from July 1, 2023) for deduction of tax at source on winnings from "online games". Simultaneously, a new Section 115BBJ (applicable from April 1, 2023) has also been introduced to provide for a tax on winnings from online games which shall be calculated at a rate of 30% on the amount of net winnings from such online games. Consequently, amendments have also been made to Section 194B and Section 115BB to exclude income from winnings from online games from the purview of the said sections.