Complete Guide to TDS on Online Gaming Winnings – Section 194BA

With the rapid rise of online gaming in India, the government has introduced Section 194BA of the Income Tax Act to regulate and tax winnings from online games. This section came into effect from 1st April 2023, targeting income earned from online gaming platforms. For an overview of all TDS provisions, see our TDS India Guide.

What is Section 194BA?

Section 194BA mandates that any person responsible for paying income by way of winnings from online games shall deduct tax at source (TDS). This applies regardless of whether the winnings are in the form of cash, kind, or a combination of both.

Applicability of TDS

The section is applicable to all online gaming platforms and individuals earning income through such platforms. Unlike other TDS sections, there is no threshold limit; even Re. 1 earned is liable for TDS. Also check Section 194B – TDS on Lottery Winnings.

TDS Rate under Section 194BA

A flat rate of 30% is deducted as TDS on net winnings. The rate does not consider income tax slab or other deductions.

What is Net Winnings?

Net winnings are calculated as:

Total withdrawals from the user account during the financial year
Minus total deposits made by the user into the same account during the year

If net winnings are positive, TDS applies at the time of withdrawal or at the end of the financial year, whichever is earlier.

Examples

Example 1: If a user deposits ₹5,000 and wins ₹10,000 but withdraws only ₹8,000 — net winnings = ₹3,000. TDS = ₹900.

Example 2: If the user never withdraws and the balance remains in the account till year end, TDS is still deducted on ₹5,000 if that is the net winning.

Time of Deduction

At the time of withdrawal by the user; or
At the end of the financial year – on net winnings that remain unwithdrawn

Who Must Deduct TDS?

Every gaming intermediary (like Dream11, MPL, RummyCircle, etc.) must deduct TDS before allowing withdrawal or crediting winnings. Learn more about TDS on Salary (Section 192).

Differences Between Section 194BA and Section 194B

Section 194B applies to lotteries and game shows, while 194BA applies to online gaming platforms.
194BA has no threshold; TDS is applicable even on Re.1.
Section 194B applies on per-transaction basis, 194BA on net winnings.

Non-Cash Winnings

If the winnings are in kind (like vouchers, tokens), TDS must be paid by the user or deducted from a corresponding cash portion before giving away the prize. Know about Form 16 and TDS certificates.

Compliance for Gaming Platforms

Obtain PAN of the user
File TDS returns on time
Issue TDS certificate (Form 16A)
Report to Income Tax Department via quarterly returns

Common Errors and Solutions

Error: Not deducting TDS on kind winnings – Solution: Ensure user deposits tax or deduct equivalent value.
Error: Delayed deduction – Solution: Implement real-time TDS computation.
Error: Incorrect reporting in Form 26Q – Solution: Verify data before filing.

Table of Contents