As of April 1, 2023, a 30% tax deducted at source (TDS) is applicable on all net winnings from online gaming. This means that online gaming companies are required to deduct 30% TDS on all winnings, regardless of the amount, when a player withdraws their winnings.
Previously, TDS was only applicable on winnings from online gaming that exceeded ₹10,000 in a financial year. This change was made in the Finance Bill 2023, which was passed by the Indian Parliament on February 1, 2023.
The TDS is calculated on the net winnings, which is the total winnings minus the total losses. For example, if a player wins ₹1000 and loses ₹500, their net winnings would be ₹500. The TDS would then be ₹150 (30% of ₹500).
The TDS is required to be deducted by the online gaming company at the time of withdrawal. The company is then required to deposit the TDS with the government.
Players who are subject to TDS on their online gaming winnings will need to file their income tax return and claim a deduction for the TDS that has been deducted.
The TDS on online gaming winnings is a new tax, and there are still some questions about how it will be implemented. However, the government has stated that the TDS is intended to ensure that all online gaming players pay their fair share of taxes.
Here’s How TDS will be calculated : -
Taxable Amount (Net Winnings) = A-B-C-D
Where,
A= Total Withdrawals (including current withdrawal amount)
B= Total Deposits
C= Opening Balance as on 1/04/2023
D= Amount on which TDS already deducted
There are some examples showing how TDS will be deducted on Ludo Coffee Application: -
Example 1 :
Total Deposits after 01 April 2023 = Rs 3,000
Total Withdrawals after 01 April 2023= Rs 5,000
Opening Balance as on 01 April 2023 = 1,000
Net winnings = 5,000-3,000-1,000
TDS = 30% of Rs 1,000 = Rs 300
Withdrawal amount credited to your bank account = Rs 5,000 – Rs 300 = Rs 4700
The TDS amount of Rs 300 paid by you will be attributed to your total Paid TDS.
Example 2 :
Total Deposits after 01 April 2023 = Rs 5,000
Total Withdrawals after 01 April 2023 = Rs 10,000
Opening Balance as on 01 April 2023 = Rs 1,000
Amount on which TDS already deducted = Rs 3,000
Net winnings = 10,000-5,000-1,000-3000
TDS = 30% of Rs 1,000 = Rs 300
Withdrawal amount credited to your bank account after deducting Rs. 300 TDS amount.
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