The tax deducted at source (TDS) on online gaming applications will now be effective from April 1, 2023 versus earlier provision of July 1, 2023, according to Finance Bill 2023 amendment. The Budget 2023 earlier announced that TDS on online gaming will come into effect from July 1, 2023 for financial year 2023-24. However, the government made the change to the date while passing the Finance Bill in Lok Sabha on Friday.

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Taking note of the representations made by the gaming industry, Shashi Mathews, Partner, IndusLaw said that the government had proposed to bring the latest TDS provisions, applicable to online gaming, into effect from April 1.

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"The TDS on the online gaming was also proposed to be deducted at the double rate, in case of non-compliance in return filing by the concerned deductee, where the TDS amount in the past year was more than Rs 50,000. It appears that these amendments have now been accepted. This may require the gaming operators to seek an undertaking and necessary proofs from the users, to ensure proper compliance with this provision," Mathews said.

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Budget 2023 proposed to restructure the TDS deduction on online gaming.

Currently, TDS on winnings made on online games is applicable if the winnings exceed Rs 10,000 in a financial year. However, after the changes, TDS on winnings from online games will be deducted for every rupee earned, net of entry fees (if any). The rate at which TDS on winnings from online games is deducted at 30 percent.

This will be applicable from April 1, 2023. The online gaming sector has welcomed this move, saying it beings a lot more clarity to how online gaming is taxed.

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