Budget 2023 proposes 30 per cent TDS on net winnings in online games; experts note impact on user psyche
By Team Newsable | First Published Feb 1, 2023, 5:58 PM ISTThe government on Wednesday proposed to impose a 30 per cent tax on net winnings from online gaming and also do away with the existing threshold limit of Rs 10,000.
The government on Wednesday proposed to impose a 30 per cent tax on net winnings from online gaming and also do away with the existing threshold limit of Rs 10,000.
Two new provisions for Tax Deducted at Source (TDS) on online gaming were proposed in the Budget 2023–24: the abolition of the existing Rs 10,000 barrier for applying TDS and a 30% tax on payment of net winnings in a financial year.
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At the end of the fiscal year, the tax must be withheld at the source if the money is not taken from the user account.
Sanjay Malhotra, the Revenue Secretary, stated following the Budget that the tax will be on net gains on the total amount.
"When you take out the money from the winning accumulated pool, the withholding tax would be levied on that," Malhotra said.
The Rs 10,000 requirement was eliminated as part of the other adjustment to the TDS provision for online gaming. Malhotra claimed that the action was taken after the tax agency learned that some online gambling providers maintained winning amounts below the cutoff, so they would not be subject to the TDS provision.
Nangia Andersen LLP Partner Sudin Sabnis said online gaming has assumed gigantic proportions in India, with revenue of the Indian mobile gaming industry expected to reach USD 5 billion by 2025 and has been a subject matter of intense government scrutiny in the recent past from GST and Income Tax perspective.
"The Budget seeks to introduce a withholding tax on entire net winnings of any such user of online gaming platform. The gaming industry would need to revamp its strategy as these provisions, along with ongoing discussions in GST Council, could impact the user psyche similar to taxation of cryptocurrencies introduced in the last Budget," Sabnis said.
Tax and consulting firm AKM Global, Tax Partner Amit Maheshwari said two new sections have been proposed with respect to online gaming Section 115BBJ to tax such proceeds at 30 per cent and Section 194BA providing TDS on net winnings in the user account at the end of the financial year.
"Additionally, certain definitions have been provided such as computer resource', 'internet', 'online game', 'online gaming intermediary', 'user', 'user account' in order to avoid ambiguity," Maheshwari said.
(With inputs from PTI)
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