The Basic Facts First
The taxation law has not changed, the only thing which has changed is the TDS policy. For context, the winnings that users were declaring at the end of the year and subsequently paying tax at time of filing return, shall now be deducted at the time of every withdrawal and at the end of financial year by the fantasy platform. This would make tax filing much easier, since you only need the TDS certificate from the fantasy platform to file the income tax return.
The revised policy is applicable from 1st April, 2023 and would not impact your current balance. The balance you have at the end of year, i.e. on 31st March 2023, will not be subject to any TDS.
The tax applied is on net winnings from the next financial year. The net winnings is your total winnings in the year minus your total investments in the year.
What is TDS?
Before we dive into the revised policy, let’s first understand what TDS is. TDS (Tax Deducted at Source) is a tax that is deducted by the payer at the time of making payment to the payee. TDS is collected to make it easier for payee to get tax deducted in instalments rather than in one-go at the end of year. The payer deposits the deducted tax amount with the government on behalf of the payee. In case the tax liability at the end of the year is lesser than the TDS deducted, the payee can claim a credit for this tax amount in their income tax return.
In this instance, a Fantasy Sports Platform like Fantasy Akhada will be the payer and the fantasy user will be the payee.
What is India’s Revised TDS Policy for Fantasy Sports Gaming Industry 2023?
India’s revised TDS policy for the fantasy sports gaming industry was introduced in the Union Budget 2023-24 by Finance Minister Nirmala Sitharaman and will come into effect from 1st April, 2023, as proposed in the Finance Bill 2023.
The TDS rate for net winnings from online games has been set at 30% + cess. Starting 1st April, 2023, all “net winnings” from online gaming shall be subject to TDS basis income tax regulations.
The TDS shall be deducted on net winnings, at the time of every withdrawal.
Here, Net Winnings = Total Winnings – Total Investments (in a financial year). Apr 1 to Mar 31 duration is considered a financial year.
How is India’s Revised TDS Policy for Fantasy Sports Gaming Industry 2023 Different from the Current Policy?
Under the current policy, TDS was deducted at the rate of 30% + Cess for winnings above Rs. 10,000 in a contest. However, the new policy has no such threshold and TDS shall be deducted on entire net winnings of the user.
The TDS will need to be paid either when the net winnings are withdrawn or at the end of the fiscal year.
The policy also requires platforms to collect PAN (Permanent Account Number) or / and? Aadhaar card details of users, to ensure accurate tax calculations and compliance with the law. The deducted TDS amount will be deposited with the government within the stipulated time frame, and users will receive TDS certificates that they can use to claim tax credit while filing their tax returns.
Real-Life Examples
Scenario:
If your net winnings are more than 0, then TDS will be deducted from the net winnings at the time of withdrawal.
Example:
- Total winnings in the financial year (A) = Rs. 25,000
- Total Investments in the financial year (B) = Rs. 10,000
In the above scenario, if you want to withdraw Rs. 25,000, then your net winnings for the financial year will be Rs. 15,000 (Rs. 25,000 – Rs. 10,000) shall be subject to TDS (30% + Cess).
Post deducting the TDS, the balance withdrawal amount will be credited to your bank account.
Important Amendments to Note
Section 115BB: The tax on winnings from lotteries, crossword puzzles, and races, including horse races, card games, and other games of any kind, as well as gambling and betting of any kind or nature whatsoever, is outlined in Section 115BB. The amendment essentially states that online gaming, as defined in Section 115BBJ of the Act, is exempt from this provision.
Section 115BBJ: A new section, Section 115BBJ, is planned to be added to the Income Tax Act. It essentially outlines how net gaming winnings should be taxed. A game that is “provided on the internet and is accessible to a user through a computer resource, including any telecommunication device,” is another definition of an online game.
Section 194B: TDS, or “Tax Deducted at Source,” is the subject of this section. According to this, TDS must be applied to lottery or crossword puzzle earnings that exceed Rs. 10,000 in a financial year. Gambling and betting are among the new activities that can be taxed as a result of the amendment.
Section 194BA: This is a brand-new section. It states that TDS should be levied on net earnings in their user account for online gaming within a financial year. The provision also states that TDS will be charged whenever winnings are taken out of a user account throughout a fiscal year. Additionally, it will also be deducted from remaining net funds in the user’s account’s at the end of the fiscal year.
Wrapping Up
The revised TDS policy will apply to all everyone who plays fantasy sports in India. The policy will apply to all types of fantasy sports games, including cricket, football, basketball, and others. It’s a win-win situation for fantasy sports users as they don’t have to do the work to calculate their taxes for themselves, the platform you play on will do it for you.
In case you still find all this a little confusing and overwhelming, don’t worry, Fantasy Akhada has your back! We’ve decoded the NEW TDS RULES 2023 for you in a quick video which you can watch here.
