TDS and taxability on the net winnings from online games
The Finance Minister, Nirmala Sitharaman, in Union Budget 2023-24, proposed the provisions of “TDS and taxability on net winnings from online games”.
Check-out, what comes next for Taxpayers with the introduction of TDS on net winnings from online games.
- Threshold limit under section 194B (winnings from any lottery or crossword puzzle or card game and other game) and 194BB (horse racing in any race course or for arranging for wagering or betting in any race course) proposed to amend from Rs. 10,000/- per transaction to Rs. 10,000/- during the year i.e., Rs. 10,000/- either from one or more transactions. Which means, once the limit exceeds, the TDS would be applicable on every single winning amount during the financial year and limit of Rs. 10,000/- would not be available for every transaction separately.
- This amended threshold limit would be applicable from 1st April, 2023.
- New section 194BA is proposed to be introduced for deduction of tax at source on winnings from online games, applicable from 1st day of July, 2023.
- Important Note: Under Section 194BA, TDS is applicable on winning without any limit, as section stated that “any person responsible for paying to any person any income by way of winnings from any online game during the financial year”.
- New Section 194BA provide for TDS on net winnings in the user account at the end of the financial year.
In case there is withdrawal from user account during the financial year, the income-tax shall be deducted at the time of such withdrawal on net winnings comprised in such withdrawal.
In addition, income-tax shall also be deducted on the remaining amount of net winnings in the user account at the end of the financial year.
Rough Example for understanding:
| Particulars | Investment | Winning or Loss |
| Transaction I | Rs. 5000 | Rs. 10000 Won |
| Transaction II | Rs. 5000 | Rs. (2000) Loss |
| Transaction III | Rs. 5000 | Rs. 8000 Won |
In the above example, net winning is Rs. 16,000/- (Rs. 10,000 – 2,000 + 8,000).
In this regards, if the assessee withdraws the partial amount from net winning of Rs. 16,000/-. let’s say Rs. 9,000/- then TDS would be deducting on Rs. 9,000/- and TDS on remaining net winning amount of Rs. 7,000/- would be deducted at year end even if not withdrawn, as it is specified that “income-tax shall also be deducted on the remaining amount of net winnings in the user account at the end of the financial year.”
Note: where the net winnings are wholly in kind or partly in cash and partly in kind but the part in cash is not sufficient to meet the liability of deduction of tax in respect of whole of the net winnings, the person responsible for paying shall, before releasing the winnings, ensure that tax has been paid in respect of the net winnings;
- Proposed to introduce section 115BBJ to tax winnings from online games from assessment year 2024-25, will take effect from 1st April, 2024.
- Tax rate under section 115BBJ would be 30%.
Read More on Union Budget 2023-24
