• Notification Date: 28-04-2023
• Notification No: N/A

Online Gaming Users face Confusion due to Delay in TDS Rules On Online Gaming

The online gaming industry has welcomed the amendments made in the Finance Act 2023 on the applicability of TDS on online gaming and income tax on online gaming, the applicable date for which was moved to 1st April 2023 from 1st July 2023 on the industry’s request. The industry has commended the inclusive approach taken by the finance ministry, which also held detailed consultations with the industry on the rules. 

Under the old provisions, the online gaming industry was required to deduct TDS on every winning above Rs 10,000. The requirements were like those of lottery, horse racing. The memorandum issued by Finance Ministry to explain the provisions in the Finance Bill 2023, specific to online gaming states that: 

“It is also seen that in recent times, there has been a rise in the users of online games. There is a need to bring in specific provisions regarding TDS and taxability of online games due to its different nature, being easily accessible vide the Internet and computer resources with a variety of playing options and payment options.” 

Separate provisions were created for deduction of TDS on online gaming and income tax on income from online gaming. The concept of net winnings has been introduced for the first time for online gaming. While the new amendments have come into effect from 1st April, the rules to compute net winnings have not been notified yet. 

While the industry is awaiting the rules from CBDT, the users of online gaming, estimated to be around 20 crores are thoroughly confused, as different platforms are applying different rules for deduction of TDS. Typically, online gaming users play across different platforms and different games like rummy, poker, fantasy sports, candy crush, fruit ninja etc. There are more than 500 online gaming platforms and there are wide variations in the practices adopted by the platforms, due to lack of rules on computations. 

These practices by the industry will only further complicate life for the users in filing income tax returns, especially for the months where the rules have not been issued, where they would need to reconcile TDS deducted across platforms and arrive at the appropriate tax liability. While the intent of the amendments was to provide clarity to both the industry and the users, the delay in issuing the rules is only creating more confusion to the users of online gaming.