Provisions Relating To TDS/TCS in Budget 2023

“Budget 2023 introduces new TDS/TCS provisions for online gaming winnings, revises rates for overseas remittances and tour packages, and adjusts cash withdrawal thresholds for co-operatives. Additionally, removes TDS exemption on interest from listed securities in demat form, effective April 1 and July 1, 2023.”

TDS and Taxability of winning from online Games:

With the technological advancement and rise of mobile and internet connectivity, a number of on line games in the nature of gambling and betting has grown manifold in the recent times. Catching hold of such income and collecting tax thereon is difficult looking to the unique nature of online platform for the games as well as payment options.

In order to ensure proper tracking of such winnings as well as to bring such income in to the ambit of taxation, the Finance Bill, 2023 has proposed the following amendments.

• At present provision of section 194B provides that winnings from lottery or cross-word puzzle or card games or other games TDS shall be made at the time of payment when it exceeds Rs. 10,000. Section 194BB provides that winning from horse race exceeds Rs. 10,000 TDS shall be made.

The existing provisions of section 194B and 194BB to be amended to provide that the TDS shall be on the amount or the aggregate amount exceeding Rs. 10,000 in a financial year.

• The existing section 194B, shall include gambling or betting within its scope.
• A new section 194BA shall be inserted w.e.f. 1^st July, 2023 to provide for TDS on net winning from online games (to be computed in a prescribe manner). Consequently, the on line games shall be excluded from purview of section 194B from that date.
• The TDS under section 194BA shall be made from the user account at the end of the financial year. However, if the user withdraws any amount during the financial year, the TDS shall be made at the time of withdrawal on the net winnings comprised in the amount withdrawn. The remaining amount of net winnings shall be subjected to TDS at the end of the year.
• The proposed section 194BA provides that in case the net winning is partly or fully in kind, the responsible person shall ensure the payment of tax on such winning before releasing the winning proceeds.
• The following definitions are proposed to be provided.

1. “computer resource” means computer, computer system, computer network, data, computer data base or software;

2. “Internet” means the combination of computer facilities and electromagnetic transmission media, and related equipment and software, comprising the interconnected worldwide network of computer networks that transmits information based on a protocol for controlling such transmission;

3. “online game” means a game that is offered on the internet and is accessible by a user through a computer resource including any telecommunication device;

4. “ online gaming intermediary” means an intermediary that offers one or more on line games;

5. “ user” means any person who accesses or avails any computer resource of an online gaming intermediary;

6. “user account” means account of a user registered with an online gaming intermediary.

• A new section 115BBJ shall be introduced w.e.f. A.Y.2024-25 to provide for taxability @ 30% on the winnings from online games, incomes other than the winning from online games shall be chargeable to tax at the rate applicable to the respective income.

Increase in rate of Tax Collection at Source(TCS) on certain remittances:

The existing provisions of Section 206C provides for TCS on business trading in alcohol, liquor, forest produce, scrap etc. Section 206C(1G) provides for TCS on foreign remittance through the Liberalized Remittance Scheme(LRS) and on sale of overseas tour package.

In order to increase TCS on certain foreign remittances and on sale of overseas tour packages, amendment is proposed in Section 206C(1G) of the Act. The current and proposed TCS rates are as under:

This amend will take effect from 1^st July, 2023. 

Increasing the threshold limit for co-operatives to withdraw cash without TDS:

The provision of Section 194N provide that a banking company or a co operative society carrying on the business of banking or a post office, which is responsible for paying the aggregate amounts in excess of Rs. 1crore in cash during the previous year to any person (recipient) from one or more accounts maintained by the recipient with it shall, at the time of payment of such sum, deduct 2% of such sum, as TDS. In case recipient is a non-filer of tax returns, TDS is required to be made at 2% for aggregate amount paid in cash between Rs. 20 lakh to 1crore and TDS at 5% for aggregate amount paid in cash exceeding Rs. 1crore during the financial year.

It is proposed to increase the threshold limit of Rs. 1crore to Rs. 3crore, if the recipient is a “co-operative society”.

This amend will take effect from 1^st April, 2023              

Removable of exemption from TDS on payment of interest on listed securities:

Section 193 deals with TDS on interest on securities paid to any person. Clause (xi) of the said section provides exemption from making TDS from certain securities if such security is in demat form and is listed on recognized stock exchange in India.

It has been notice that there is under reporting of interest income by the recipient as TDS is not made from such interest income. Hence it is proposed to omit clause (xi) of Section 193. As a result, the interest income for securities held in demat form will attract TDS.

This amendment will take effect from 1^st April, 2023.