Real money gaming industry welcomes TDS clarification in Budget 2023

Industry officials said that the clarification in the Union Budget clears up uncertainty for platforms offering real money games like rummy and fantasy sports

February 01, 2023 10:23 pm | Updated February 02, 2023 11:49 am IST - NEW DELHI

Image for representation purpose only.

Image for representation purpose only. | Photo Credit: Getty Images/iStockphoto

The real money gaming industry — which runs games where users can stake money for winnings on apps — welcomed the Union Budget’s clarification on Tax Deducted at Source (TDS) for money won on their platforms. These platforms, referred to as “online gaming” by the government, are required to deduct 1% TDS from users when the latter withdraw their winnings and deposits.

Union Finance Minister Nirmala Sitharaman said that the government would be “removing the minimum threshold of ₹10,000 for TDS and clarifying taxability relating to online gaming.” This would allow real money gaming platforms to assess TDS on net earnings over the year instead of on individual transactions. “It is seen that deductors are deducting tax under Section 194 B and 194 BB of the Act by applying the threshold of ₹10,000 per transaction and avoiding tax deduction by splitting a winning into multiple transactions each below ₹10,000,” the government said in its memorandum explaining the Budget. “This is against the intention of legislature,” it emphasised.

‘Ambiguities cleared’

“It’s a progressive step as the government is creating a new section for the online gaming industry. It cements the recognition of online gaming as a distinct technology-driven entertainment sector,” Games24x7 Chief Financial Officer Rahul Tewari said in a statement. “[W]e will wait to get more clarity from the department on the computation mechanism.”

“[T]he government has cleared ambiguities regarding TDS calculation for online gaming and simplifies the process for both companies and users,” Vikash Sureka, the Mobile Premier League fantasy sports platform’s Chief Financial Officer, said in a separate statement.

“Since winnings in online gaming are given in both cash and in kind, it is important to note that even winnings paid in kind are taxable. And the obligation is on the gaming company to ensure that the winner pays the tax before the winning is given to him,” said Sanjay Tolia, tax leader at PwC.

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