Income-tax (Fifth Amendment) Rules, 2023

Last updated: 24 May 2023

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The Central Board of Direct Taxes has issued the Income-tax (Fifth Amendment) Rules, 2023. These rules, effective from their publication date (with some provisions from July 1st, 2023), introduce specific methods for calculating net winnings from online games. This amendment clarifies how to determine taxable income from online gaming activities for the purposes of sections 115BBJ and 194BA of the Income-tax Act.

MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION New Delhi, the 22nd May, 2023 INCOME-TAX 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-secti

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FAQ :

The purpose of these rules is to further amend the Income-tax Rules, 1962, specifically to introduce provisions for calculating net winnings from online games for tax purposes under sections 115BBJ and 194BA of the Income-tax Act.

These rules generally come into force from the date of their publication in the Official Gazette. However, specific amendments related to rule 31A come into effect from July 1st, 2023.

Net winnings for section 115BBJ are calculated using the formula: Net winnings = (Aggregate amount withdrawn + Closing balance) - (Aggregate non-taxable deposit + Opening balance).

For the first withdrawal under section 194BA, net winnings are calculated as: Net winnings = Amount withdrawn - (Aggregate non-taxable deposit + Opening balance). If the sum of non-taxable deposits and opening balance is equal to or greater than the amount withdrawn, net winnings are zero.

A 'non-taxable deposit' is an amount deposited by a user into their account that is not subject to tax.

Transfers between different user accounts belonging to the same user, maintained with the same online gaming intermediary, are not considered as withdrawals or deposits for the purpose of tax deduction under section 194BA.