Calculation of net winnings from online games for purpose of section 194(1) [Table: Sl. No. 5]

Net winnings for the year (sub-rule 1). (A + D) − (B + C), where A is the total withdrawn from the user account in the year, B is the total non-taxable deposits made in the year, C is the opening balance and D is the closing balance.

On withdrawal, for tax deduction under section 393(3) [Table: Sl. No. 2].

• First withdrawal (sub-rules 2 and 3): A − (B + C), where A is the amount withdrawn, B is non-taxable deposits made until then and C is the opening balance. It is zero if B + C is equal to or greater than A.
• Each later withdrawal (sub-rules 4 and 5): A − (B + C + E), where A is the total withdrawn in the year until then including this withdrawal, B and C as before, and E is the net winnings already counted in earlier withdrawals on which tax was deducted. It is zero if B + C + E is equal to or greater than A.
• Winnings left in the account at the year end (sub-rules 6 and 7): (A + D) − (B + C + E), with A the total withdrawn in the year, D the closing balance and E as above. It is zero if B + C + E is equal to or greater than A + D.

Definitions (sub-rule 8). A "non-taxable deposit" is an amount the user deposited that is not taxable. A "taxable deposit" is any amount deposited that is not a non-taxable deposit, including any amount paid directly to the user other than through the user account. A "withdrawal" is any amount the user withdraws from any user account.

Clarifications (sub-rule 9).

• The user account includes every account of the user, by whatever name, registered with the online gaming intermediary into which deposits or winnings are credited and from which withdrawals are debited.
• A payment to the user in cash or kind, or partly each, that is not from the user account is treated as a taxable deposit made, and the same amount withdrawn, at the same time, and so is included in A.
• With multiple user accounts of one user, each is considered, and deposits, withdrawals and balances are aggregated across them; a transfer between a user's accounts with the same intermediary is not a withdrawal or deposit.
• A taxable deposit by way of bonus, referral bonus, incentive, promotional money or discount that can be used only to play and not withdrawn is ignored in B, C and D; if it is later recharacterised and allowed to be withdrawn, it is treated as a taxable deposit at that time.