TDS deduction

General Information

As per Financial Budget 2023, under Section 194BA of the Income Tax Act, 1961. The rate of TDS that has been prescribed on your net Winnings has been fixed at 30%.

Financial Year is from 1st April 2023 to 31st March 2024.

What is TDS or Tax Deduction at Source? How is TDS applicable in Real Money Games?

• TDS or Tax Deducted at Source is income tax deducted from the money paid at the time of making certain payments like rent, professional fees, salaries, etc.
• As per section 194BA of the Income Tax Act, 1961, if a person is earning any income from winnings from any online gaming, then that person is responsible for paying 30% of their net winning to the government as tax, this deduction is termed as TDS or Tax Deduction at source.

Net Winnings Explained

• Net Winnings is the difference between your total winnings and total deposits, made during a time period, or the entire financial year, so accumulated and calculated at the time of your withdrawal.
• For example, if you have deposited a total of Rs 100 at one instance, and won 2 games with a win amount of Rs 50 each, your Net Winnings will be (50 x 2) – 100 = Nil.
• Thus, Net Winnings = Total Win Amount – Total Deposits.

What is TDS Liability? Can it increase during a financial year?

• TDS Liability is the total TDS to be paid by you based on your current net winnings in a financial year.
• TDS Liability will be calculated on the basis of your Net Winnings. If your Net Winnings increase during the financial year, the TDS Liability would increase. Similarly, the TDS Liability would go down if your Net Winnings decrease over the financial year.

When is TDS calculated and deducted?

• As per section 194BA, TDS is to be calculated at the time when the user is making a withdrawal and/or at the end of each financial year.
• Deduction is done on the amount the User would withdraw.

How is TDS calculated on Net Winnings?

If your Net Winnings in a financial year or at the time of withdrawal, are positive, TDS at the rate of 30% shall be applicable on your Net Winnings. The following examples show when TDS will be nil and when it is subjected to deduction.

• Person "A" has made a total deposit of Rs.5000, and total winnings of Rs. 2000, then his net winnings shall be in negative.
• His total deposit is Rs. 5000 and total winning is Rs. 5000, then his net winning shall be null.
• His total deposit is Rs. 5000 and total winning is Rs.9000, having his net winnings in positive, thus the TDS will be calculated on his net win amount, which that is Rs. 4000.

Hence 30% of his net winning i.e., Rs. 1200 shall be deducted at the time of withdrawal.

(See the table below. Example no. 1-3)

Example No.	Deposited Amount[D] (Rs)	Amount Won/ Amount Withdrawn [W] (Rs)	Net Winnings[W-D](Rs)	30% TDS Deduction Amount (Rs)
1.	5000	2000	-3000	nil
2.	5000	5000	0	nil
3.	5000	9000	4000	1200

Thus, "A" will get their withdrawal amount only after 30% TDS deduction on their net winnings.

How TDS is calculated at the end of the financial year?

As of 31st March, if your Net winnings are positive, it shall be entitled to 30% deduction, irrespective of any withdrawal made.

Further, if your TDS paid is more than your TDS liability, the difference shall be adjusted in your game wallet on 31st March.

How is TDS deducted at the time of withdrawal?

If your total withdrawals (including the new withdrawal) in the financial year become more than your total deposits, the new withdrawal becomes eligible for a TDS deduction. The total deposits will be the sum of deposits made by you on the app.

Example 1

Total Deposits till date is Rs 3,000
Total Withdrawals till date is Rs 2,500
New Withdrawal amount is Rs 1,000
Total Withdrawals (including the new Withdrawal) = Rs 2,500 + Rs 1,000 = Rs 3,500
Since the total Withdrawals exceed the total Deposits, the new Withdrawal will be eligible for a TDS deduction.
Difference between total Withdrawal and total Deposits = Rs 3,500 – Rs 3,000 = Rs 500
TDS = 30% of Rs 500 = Rs 150
Net Withdrawal amount credited to your bank account = Rs 1,000 – Rs 150 = Rs 850
The TDS amount of Rs 150 paid by you will accumulate to be your total Paid TDS.

Example 2

Total Deposits till date = Rs 5,000
Total Withdrawals till date is Rs 4,500
New Withdrawal amount is Rs 1,500
Total Withdrawals (including the new Withdrawal) is Rs 4,500 + Rs 1,500 = Rs 6,000
Say total Paid TDS till date is Rs 100.
Since the total Withdrawals exceed the total Deposits, the new Withdrawal will be eligible for a TDS deduction.
Difference between total Withdrawal and total Deposits = Rs 6,000 – Rs 5,000 = Rs 1,000
TDS is 30% of Rs 1,000 = Rs 300
TDS deduction applicable on your transaction = Rs 600 – (Paid TDS till date) = Rs 300 – Rs 100 = Rs 200
Net Withdrawal amount credited to your bank account = Rs 1,500 – Rs 200 = Rs 1,300
The TDS amount of Rs 200 paid by you will accumulate to be your total Paid TDS.

Example 3

Total Deposits till date is Rs 1,000
Total Withdrawals till date is Rs 500
New Withdrawal amount is Rs 300
Total Withdrawals (including the new Withdrawal) is Rs 500 + Rs 300 = Rs 800
Since the total Withdrawals do not exceed the total Deposits, the new Withdrawal will not be eligible for a TDS deduction.
Net Withdrawal amount credited to your bank account is Rs 300.

What is a TDS Certificate? How to obtain a TDS Certificate?

• A TDS certificate is a certificate of TDS deduction issued by the Deductor (Ludo Empire). The certificate contains details of the TDS deductions made during a particular time period.
• A TDS certificate can be used by you during Income Tax Return filing for claiming refund on the paid TDS if your outstanding TDS at the end of the financial year is negative.
• And to obtain this TDS Certificate, User needs to upload their respective PAN Ids. TDS certificates will be available as per Section 26AS of the Income Tax Act, 1962, only after PAN-based KYC verification.
• Please contact our Customer Support Team to obtain your TDS Certificate. TDS Certificate will be available tentatively on 20th June, 20th August, 20th November, and 20th February of each Financial Year.

 

DISCLAIMER: Please note that this TDS calculation mechanism is based upon the understanding of the TDS provisions introduced in the Financial Budget, 2023 which are yet to be clarified in accordance with the Budget. Fabzen reserves its rights to modify/ amend the TDS Calculation mechanism based on TDS provisions applicable at the relevant time and upon clarifications received from the Finance Ministry of India.