Are you an avid online gamer who has been skilled enough to win big in your favourite game? Congratulations on your success! However, it is important to understand that your winnings may attract taxes in the form of TDS on online gaming.
Online gaming has become a popular form of entertainment in recent years, with millions of people playing games online every day. However, with the rise in online gaming, the government has introduced policies to ensure that players pay their fair share of taxes on their online gaming winnings.
The government has been introducing new policies related to TDS on online gaming winnings to ensure that the taxation of online gaming income is streamlined and transparent. It is important for players to stay updated on these policies and comply with them to avoid any legal issues and to contribute to the development of the country through tax payments.
What is TDS?
Tax Deducted at Source (“TDS”) is a tax required to be deducted from the payments as per the Income Tax Act of 1961. The concept of TDS on online gaming was introduced in 2016 to ensure that taxes are paid on online gaming winnings, just like any other form of income. Now, online real-money gaming platforms will deduct tax from players’ taxable winnings as per the government’s revised TDS provisions on online gaming.
TDS on Online Gaming
TDS on online gaming is a form of tax that is deducted at the source of your winnings, i.e., by the online gaming platform or operator. The TDS rate on online gaming winnings is 30%, as per the Income Tax Act, of 1961. TDS will be deducted at the time of withdrawal into the user’s bank account during the financial year AND/OR on 31st March of that financial year. However, no TDS deduction if you don’t have Taxable Winnings at the time of withdrawal or at the end of the financial year.
It is important for online gamers to be aware of the TDS policy on online gaming winnings and to ensure that the TDS is deducted and deposited correctly by the platform or operator. Maintaining proper records of online gaming winnings and TDS deducted is advisable to avoid any discrepancies while filing income tax returns.
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The online gaming platform or operator is responsible for deducting TDS from your winnings and issuing a TDS certificate, Form 16B, within 15 days of the end of the quarter in which the TDS was deducted. You can use this certificate to claim credit for the TDS deducted while filing your income tax return.
Understand TDS Deductions on Rush
On Rush, your TDS amount will be calculated on the basis of your taxable winnings, which will be calculated as follows:
Taxable Winnings = Total Withdrawals – Total Deposits in User’s Wallet – Opening Balance – Previously Taxed Amount
Here,
Total Withdrawals: Total amount withdrawn during the financial year.
Total Deposits: Total amount deposited during the financial year.
Opening Balance: Amount in the account at the beginning of the financial year.
Previously Taxed Amount: Total amount on which taxes were already paid during the financial year.
For example, Rahul already has ₹500 in his Rush account. He then deposits ₹400, plays games and wins ₹1500.
Scenario 1 – If Rahul wants to withdraw ₹800,
We calculated his taxable winnings as follows:
Taxable Winnings = Total Withdrawals – Total Deposits – Opening Balance – Previously Taxed Amount
| Total Withdrawals | Total Deposits | Opening Balance | Previously Taxed Amount | Taxable Winnings |
| 800 | 400 | 500 | 0 | -100 |
In this case, his taxable winnings are less than ₹0, therefore there will be no TDS deduction.
Scenario 2 – If Rahul now withdraws an additional ₹700,
We calculated his taxable winnings as follows:
Taxable Winnings = Total Withdrawals – Total Deposits – Opening Balance – Previously Taxed Amount
| Total Withdrawals | Total Deposits | Opening Balance | Previously Taxed Amount | Taxable Winnings | TDS Deduction @ 30% |
| 1500 | 400 | 500 | 0 | 600 | 180 |
In this case, his taxable winnings are more than ₹0, therefore there will be a 30% TDS deduction.
TDS deduction = 30% of taxable winnings (₹600)
= ₹180
Amount to credit in bank= Requested Withdrawal amount (₹700) – TDS deduction (₹180)
= ₹520
Scenario 3 – Rahul’s TDS at the end of the financial year,
At the end of the financial year, 30% TDS will be deducted from the Rush account on your taxable winnings as per the Govt. policy.
Year-end Rush Wallet Balance = ₹300
We calculated his taxable winnings as follows:
Taxable Winnings (End Of Year) = End of Year Rush Wallet Balance + Total Withdrawals – Total Deposits – Opening Rush Wallet Balance – Previous Taxed Amount
| Year End Wallet Balance | Total Withdrawals | Total Deposits | Opening Balance | Previously Taxed Amount | Taxable Winnings | TDS Deduction @30% | Net Wallet Balance |
| 300 | 1500 | 400 | 500 | 6000 | 300 | 90 | 210 |
In this case, his taxable winnings are more than ₹0, therefore there will be a 30% TDS deduction.
TDS deduction= 30% of taxable winnings (₹300)
= ₹90
₹90 will be deducted from Rahul’s Rush account on 31st March.
Net Wallet Balance at the end of the financial year, i.e, 31st March= ₹210 (₹300-₹90)
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Benefits of TDS for Players
While TDS on online gaming winnings may seem like a burden for players, it is important to understand that there are several benefits to this policy.
- TDS on online gaming winnings helps in promoting tax compliance and increasing the revenue of the government. It ensures that players pay their fair share of taxes on their online gaming winnings, just like any other form of income. This revenue can be used for various developmental projects and initiatives, such as building infrastructure, improving healthcare, and promoting education.
- TDS on online gaming winnings provides players with a sense of security and trust in the online gaming ecosystem. By ensuring that the online gaming platform or operator deducts and deposits the TDS correctly, players can be assured that the platform is legitimate and follows the rules and regulations set by the government.
- TDS on online gaming winnings can also be beneficial for players in terms of tax planning. Players can claim a credit for the TDS deducted from their online gaming winnings while filing their income tax returns. This can help in reducing their overall tax liability and can provide them with a higher net income.
In conclusion, TDS on online gaming winnings is a tax that you need to be aware of if you are a frequent online gamer. While it may seem like a burden, it is important to pay your taxes to avoid any legal issues. Make sure to keep track of your winnings and the TDS deducted to avoid any confusion while filing your income tax return. Happy gaming!
Frequently Asked Questions (FAQ’s) Regarding TDS on Online Gaming Winnings
Tax Deduction at Source (“TDS”) is a tax required to be deducted from the payments as per the Income Tax Act, 1961.
TDS is deducted at the rate of 30% on taxable net winnings in a Financial Year (April to March).
At the time of withdrawal into the user’s bank account during the financial year AND/OR on 31st March of that financial year.
You can claim credit for the TDS deducted while filing your return of income.
At the end of the financial year, i.e. 31st March, 30% TDS will be deducted from your taxable winnings as per the Govt. policy.
Taxable Winnings (End Of Financial Year) = End of Year Rush Wallet Balance + Total Withdrawals – Total Deposits – Opening Rush Wallet Balance – Previously Taxed Amount
Note: Current TDS applicability is based on the understanding of amended TDS provisions introduced in Finance Act, 2023 which are yet to be clarified by Income tax authorities and company reserves the right to modify or amend the TDS policy based on TDS provisions as suggested and clarified by the Government of India.
