I received an SMS regarding TDS changes. What are the new rules?
According to the Finance Bill that the Indian government approved, new tax regulations will take effect on online gaming applications on April 1, 2023. The law mandates that platforms that offer online games must deduct tax at source ("TDS") either at the time of withdrawal or at the end of the financial year. TDS will be assessed at a rate of 30% on each player's net winnings to the extent the net winnings are withdrawn. Net winnings in this context refer to the sum of all winnings minus the all the entry fee paid by a player in the year.
Will TDS be deducted at the end of the game / tournament, if I win more than 10,000 in a game / tournament?
No, You will not have to pay TDS at the end of the game /tournament even if you win more than ₹10000. However this winning will be counted for calculation of Net winnings and TDS will apply at the time of redeem as per policy.
What are net winnings?
'Net winnings in a game' means the total amount won/lost by the user in a game minus the total entry/joining fee paid in that game. 'Net winnings' in any period means the sum of positive and negative net winnings in all games for that period. On April 1, 2023 every user will start Net Winnings = 0.
In simpler terms, Net winnings = Profits from the games you won minus losses in the games where you didn't win.
|Game||Entry Fee (Rs)||Winnings (Rs)||Net Winnings in Game (Rs)|
In the above example user has a profit of 400 Rs in Game 1, and loss of 100 Rs in Game 2 and Profit of 300 Rs in Game 3. Net winnings at the end of Game 3 = 400 - 100 + 300 = 600 Rs
How is TDS calculated on 'Net Winnings'?
TDS is calculated as 30% of the Net Winnings if the Net winnings are greater than Zero. TDS is Zero is the Net Winnings are Negative.
Taking the above example, TDS will be 30% of 600 = 180 Rs.
When will TDS be deducted.
TDS is deducted at the time of processing a Redeem request based on the Net Winnings at that time of Redeem Request.
If the Net Winnings are greater than Zero at the time of withdrawal, TDS will be computed as 30% of Net Winnings or Withdrawal amount whichever is lower. The TDS amount will be deducted from the Withdrawal request and the balance amount will be transferred to the user.
Continuing with the example in Question # 2 -
- The player had net winnings of 600 Rs and if the player places a withdrawal request for 600 Rs, TDS will be 180 Rs and 600-180=420 Rs will be credited to the players account.
- If the Redeem request is for 500 Rs, TDS for the user will be on 500 Rs (Since redeem amount is less than Net winnings). Net Payment to the user is 500-150= 350 Rs.
At the end of the Financial year - If there is a pending tax liability, the outstanding TDS amount will be deducted from the player's wallet.
Do I have to pay TDS on my entire "net winnings from the beginning of the financial year" at each redeem?
If my "Net Winnings" reduce by the end of the financial year, will A23 give a refund of the TDS already deducted.
If your net winnings reduce or become negative at the end of the financial year, you can file your tax returns and claim refunds from the income tax department depending on your overall tax liability. For more information, please contact your tax adviser.
A23 will provide the TDS Certificates so that you can file your tax returns. However, A23 will not refund any excess TDS to the players.