What is the TDS deducted on winnings?

What is the TDS deducted on winnings?

Under Finance budget 2023, the Government of India has introduced Section 115BBJ and Section 194BA to tax any income from online gaming in India. Effective from 1st April 2023, 30% tax as Tax Deducted at Source (“TDS”) shall be deducted by any online gaming platform on net winnings.

This TDS is required to be deducted (a) at the time of withdrawal on the amount of net winning included in such withdrawal, and (b) at the closure of financial year on the net winning remaining in the wallet of the user.

Therefore, in case of no withdrawal made by the user in the entire financial year, TDS will be deducted from net winnings balance as on 31st March 2024.

Net winnings are defined as the difference between your gains and spends.

Net winnings = Total withdrawals - (total holdings as per 1st April 2023 + total deposit amount + amount which has already been taxed)

*subject to change as per the rules that are to be notified under the Income Tax 1961

[total holdings = wallet balance + open portfolio value]

Read more online on these TDS changes.

 

Let's understand this with an example:

A Trader joins TradeX. He deposits ₹1000 rupees and invests the entire amount in an event and wins ₹2000. 

Winnings = ₹2000 | Profit = ₹1000

Trading Fee = 10% of Profit = ₹100

Net Winnings = (Winnings - Trading Fee) - Deposit = (₹2000 - ₹100) - ₹1000 = ₹900

Current wallet balance = ₹1900

Case #1 - Complete Withdrawal of the Amount

TDS = 30% of ₹900 = ₹270

Withdraw after TDS = Current Balance - TDS - Bank Charges = ₹1900 - ₹270 - ₹5 = ₹1625

 

Case #2 - Partial Withdrawal of the Amount

- 1st Withdrawal of 800

Since current withdrawal request (₹1000) ≤ Deposit amount (₹1000),

Hence, TDS liability is ₹0

Withdraw after TDS = Withdraw Amount - TDS - Bank Charges = ₹800 - ₹0 - ₹5 = ₹795

 

- 2nd Withdrawal of ₹800

TDS Paid (till date) = ₹0

Since 30% of the withdrawal amount is < current TDS liability

Hence, TDS = ₹600 x 30% = ₹180

Withdraw after TDS = Withdraw Amount - TDS - Bank Charges = ₹800 - ₹180 - ₹5 = ₹615

 

- 3rd Withdrawal of ₹400

Total TDS liability = ₹270

TDS Paid (till date) = ₹180

Current TDS liability = ₹90

Since current TDS liability < 30% of the withdrawal amount

Withdraw after TDS = Withdraw Amount - TDS - Bank Charges = ₹400 - ₹90 - ₹5 = ₹305

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