Amendment in Income tax Rules, 1962, insertion of new rule 133 for prescribing calculation of net winnings for online games, notification of revised Form No. 16, Form 24Q, Form 26Q, Form 27Q, and Form 27EQ – Notification No. 28/2023-Income Tax | Dated: 22.05.2023
Central Board of Direct Taxes ICBDT) has issued Notification No. 28/2023-Income Tax dated 22.05.2023, introducing amendments to Rule 31A and further inserted new Rule 133 to Income-tax Rules, 1962. The amendments primarily focus on the calculation of net winnings from online games for taxation purposes under section 115BBJ and section 194BA of the Income-tax Act, 1961. The notification provides detailed formulas and explanations for determining net winnings based on various factors such as withdrawals, deposits, and account balances. Additionally, the notification includes updates to forms related to tax deduction and collection, such as Form No. 16, Form 24Q, Form 26Q, Form 27Q, and Form 27EQ. The amendments will come into force from the date of publication in the Official Gazette.
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
Notification No. 28/2023-Income Tax | Dated: 22.05.2023
G.S.R. 379(E).––In exercise of the powers conferred by section 295 read with section 115BBJ, section 194BA, sub-section (3) of section 200 and proviso to sub-section (3) of section 206C of the Income-tax Act 1961 (hereinafter referred to as ‘Act’), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:––
1. Short title and commencement.–– (1) These rules may be called the Income-tax (Fifth Amendment) Rules, 2023.
(2) Save as otherwise provided, they shall come into force from date of their publication in the Official Gazette.
2. In the Income-tax Rules, 1962 (hereinafter referred to as the principal rules), in rule 31A, in sub-rule(4) with effect from 1st July 2023,––
(a) for clause (ix), the following clause shall be substituted namely:-
“(ix) furnish particulars of amount paid or credited on which tax was not deducted or deducted at lower rate in view of the notification issued under second proviso to section 194N or in view of the exemption provided in fourth proviso to section 194N or in view of the notification issued under fifth proviso to section 194N;”;
(b) in clause (xvii), after sub-clause (a), the following sub-clause shall be inserted, namely:-“(aa) winnings in terms of sub-section (2) of section 194BA;”.
3. In the principal rules, after rule 132, the following rule shall be inserted, namely:–
“133. (1) Net winnings from online games during the previous year, for the purposes of section 115BBJ, shall be calculated using the following formula, namely:–
Net winnings =(A+D)-(B+C), 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 assessee during the financial year;
C = Opening balance of the user account at the beginning of the financial year; and
D= Closing balance of the user account at the end of the financial year.
(2) Net winnings comprised in the first withdrawal during the financial year, for the purposes of section 194BA, shall be calculated using the following formula, namely:–
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.
(3) Net winnings in the formula given in sub-rule (2) shall be zero, if the sum of amounts B and C is equal to or greater than the amount A.
(4) Net winnings comprised in each subsequent withdrawal during the financial year, for the purposes of section 194BA, shall be calculated using the following formula, namely:–
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.
(5) Net winnings in the formula given in sub-rule (4) shall be zero, if the sum of amounts B, C and E is equal to or greater than the amount A.
(6) Net winnings comprised in the user account at the end of the financial year, for the purposes of section 194BA, shall be calculated using the following formula, namely:–
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 the 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.
(7) Net winnings in the formula given in sub-rule (6) shall be zero, if the sum of amounts B, C and E is equal to or greater than the sum of amount A and D.
Explanation 1.– For the purposes 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.
Explanation 2.– For the removal of doubts, it is hereby clarified that –
(a) user account shall include every account of user, by whatever name called, which is registered with the online gaming intermediary and where any taxable deposit, non-taxable deposit or the winnings made by the user is credited and withdrawal by the user is debited;
(b) whenever there is payment to the user in kind or in cash, or partly in kind and partly in cash, which is not from the user account, the provisions of this rule shall apply to calculate net winnings by deeming that the money equivalent to such payment has been deposited as taxable deposit in the user account and the equivalent amount has been withdrawn from the user account at the same time and shall accordingly be included in amount A;
(c) whenever there are multiple user accounts of the same user, each user account shall be considered for the purposes of calculating net winnings and the deposit, withdrawal or balance in the user account shall mean aggregate of deposit, withdrawal or balance in all user accounts;
(d) whenever there are multiple user accounts of the same user, transfer from one user account to another user account, maintained with the same online gaming intermediary, of the same user shall not be considered as withdrawal or deposit, as the case may be, for the purposes of deducting tax under section 194BA;
(e) whenever there is taxable deposit in the form of bonus, referral bonus, incentives, promotional money, discount by whatever name called; and such deposit can only be used for playing the online games and not for withdrawal or any other purposes, such deposit shall be ignored for the purposes of calculation of net winnings and shall not be included in amount B or amount C or amount D; and
(f) whenever any bonus, referral bonus, incentives, promotional money, discount, by whatever name called, is not considered as part of amount B or amount C or amount D under clause (e) and subsequently they are recharacterised and allowed to be withdrawn, they shall be deemed as taxable deposit at the time of such recharacterisation and it shall be deemed that the equivalent amount has been deposited in the user account at that time.”.
4. In the principal rules, in Appendix II,–
(a) for Form No. 16 the following form shall be substituted with effect from 1st July 2023 and shall be applicable for the assessment year 2024-25 and subsequent assessment years, namely:––
“FORM NO. 16
[See rule 31(1)(a)]
PART A
Certificate under section 203 of the Income-tax Act, 1961 for tax deducted at source on salary paid to an employee under section 192 or pension or interest income of specified senior citizen under section 194P.
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(b) in form 24Q, with effect from 1st July, 2023,–
(i) in serial number 4, in the table, in column No. 4, for the words “Education Cess”, the words “Health and Education Cess” shall be substituted;
(ii) in Annexure I, in the table before “Verification”, in column No. 11, for the words “Education Cess”, the words, “Health and Education Cess” shall be substituted;
(iii) for “Annexure II”, the following “Annexure II” shall be substituted, namely:
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(iv) in Annexure III, in the fifth column of the first table, for the words “Whether opting for taxation u/s 115BAC [Yes/No]”, the words “Whether opting out of taxation u/s 115BAC(1A) [Yes/No]” shall be substituted;
(c) in form 26Q, with effect from 1st July, 2023,––
(i) for the brackets, words, figures and letters “[See sections 192A, 193, 194, 194A, 194B, 194BB, 194C, 194D, 194DA, 194EE, 194F, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194N, 194-O, 194P, 194Q, 194R, 194S, 197A, 206AA, 206AB and rule 31A]”, the following brackets, words, figures and letters, shall be substituted, namely:––
“[See sections 192A, 193, 194, 194A, 194B, 194BA, 194BB, 194C, 194D, 194DA, 194EE, 194F, 194G, 194H, 194-I, 194J, 194K, 194LA, 194LBA, 194LBB, 194LBC, 194N, 194-O, 194P, 194Q, 194R, 194S, 197A, 206AA, 206AB and rule 31A]”;
(ii) for the “Annexure”, the following “Annexure” shall be substituted, namely:––
“ANNEXURE: DEDUCTEE/PAYEE WISE BREAK UP OF TDS
(Please use separate Annexure for each line-item in Table at Sl. No. 4 of main Form 26Q)
Details of amount paid/credited during the quarter ended… (dd/mm/yyyy) and of tax deducted at source
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(d) in Form 27Q, with effect from 1st July, 2023, –
(i) for the brackets, words, figures and letters“[See section 194E, 194LB, 194LBA, 194LBB, 194LBC, 194LC, 194N, 195, 196A, 196B, 196C, 196D, 197A, 206AA, 206AB and rule 31A”, the following brackets, words, figures and letters shall be substituted, namely: –
“See section 194B, 194BA, 194BB, 194E, 194LB, 194LBA, 194LBB, 194LBC, 194LC, 194N, 195, 196A, 196B, 196C, 196D, 197A, 206AA, 206AB and rule 31A”
(ii) in serial number 4, in the table, in column No. 4, for the words “Education Cess”, the words, “Health and Education Cess” shall be substituted;
(iii) for “Annexure”, the following “Annexure” shall be substituted, namely:––
“ANNEXURE: DEDUCTEE WISE BREAK UP OF TDS
(Please use separate Annexure for each line item in Table at Sl. No. 04 of main Form 27Q)
Details of amount paid/credited during the quarter ended (dd/mm/yyyy) and of tax deducted at source
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(e) in Form 27EQ, with effect from 1st July, 2023, –
(i) in serial number 4, in the table, in column No. 4, for the words “Education Cess”, the words, “Health and Education Cess” shall be substituted;
(ii) for “Annexure” the following “Annexure” shall be substituted, namely:––
“ANNEXURE -: PARTY WISE BREAK UP OF TCS
(Please use separate Annexure for each-line item in Table at Sl. No. 04 of main Form 27EQ)
Details of amount received/debited during the quarter ended (dd/mm/yyyy) and of tax collected at source
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[Notification No. 28/2023 / F.No. 370142/12/2023-TPL]
MRINALINI KAUR SAPRA, Director
Note. – The principal rules were published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub-section (ii) vide notification number S.O. 969 (E), dated the 26th March, 1962 and was last amended vide notification number G.S.R. 227(E) dated 28.3.2023.
