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Dear Professional Colleagues,

Greetings of the Day !

The Central Board of Direct Taxes issued circular No. 5/ 2023, dated May 22, 2023 regarding Guidelines for removal of difficulties under section 194BA(3) of the Income-tax Act, 1961.

We have prepared these bullet pointers on the above-mentioned guidelines and the copy of the original circular is attached for your reference.


  1. If a user borrows some money and deposits in his user account, will it be considered taxable deposit or non-taxable deposit? - Non-taxable deposit.
  2. How the bonus, referral, incentives etc. will be treated as?
  • Bonus, referral bonus, incentives etc. are to be considered as taxable deposit under Rule 133 and be considered as net winnings from online games.
  • Where the deposit of incentives/bonus are money equivalent, such as coins, coupons, vouchers etc., then the equivalence of money of those deposits would be considered as taxable deposit.
  • If the bonus/incentive are deposited in the account of the user only for the purpose of playing and cannot be withdrawn then the same would be ignored while calculating the tax required for deduction.

[If the said incentive/bonus are re-characterised and they are allowed to be withdrawn, they would be treated as taxable deposit at the time when they are re-characterised.] 

  1. There are a large number of gamers who play with very insignificant amount and withdraw also very small amount. Is there any relaxation to ease compliance?

It is provided that the tax may not be deducted if the following conditions are fulfilled:

  • Withdrawn does not exceed Rs 100 in a month.
  • Tax not deducted on account of this concession is deducted at a time when the net winnings comprised in withdrawal exceeds Rs 100 in the same month or subsequent month or if there is no such withdrawal, at the end of the financial year.
  • The deductor undertakes responsibility of paying the difference.
  1. When the net winnings are in kind how will tax deduction under section 194BA operate?
  • In this situation the person responsible to pay will ensure that the tax has already been paid on that winning in kind. This year Form 26Q also has included provisions for reporting such transactions under section 194BA of the Act.
  1. How will the valuation of winnings in kind be required to be carried out?
  • The valuation of the winnings in kind will be carried out on the basis of fair market value. Two exceptions where the winnings in kinds will be carried out on the basis of the value for winnings are also provided regarding this situation:
  • When the online game intermediary has purchased the winnings before providing it.
  • When the online game intermediary is itself the manufacturer of the winnings.

Hope you find it interesting and useful to read.

For any clarification/ feedback, feel free to write us at

Best regards,



About Us

AMRG & Associates is an established Chartered Accountants firm. It came into existence in 1984 and since then has grown its branches across major Indian cities such as Delhi, Mumbai and Chandigarh. Since its inception, it has become one of the leading chartered accountants’ firms in North India. AMRG & Associates offers its clients a wide range of exceptional services through the expertise of its highly motivated group of trained professionals. The firm provides expertise in financial and business advisory, tax and regulatory, audit and assurance and risk advisory services.

AMRG & Associates has a client base of 200+ companies & individuals. The firm's approach to service delivery helps to provide value-added services to its wide clientele. Our differentiation is derived from a rapid performance based, industry-tailored and technology-enabled business advisory services delivered by talented professionals in the country.

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© -2022 AMRG & Associates All Rights Reserved. This document has been written for the general interest of our clients and professional colleagues and is subject to change. This document is not to be construed as any form of solicitation. It is not intended to be exhaustive or a substitute for legal advice. We cannot assume legal liability for any errors or omissions. Specific advice must be sought before taking any action pursuant to this document.

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