Online Gaming: Tax on winnings from Dream11, MPL and My11Circle

The growth of cricket fantasy games has been skyrocketing over the past decade with the IPL playing a major catalyst in its growth. Apps like Dream11, MPL and My11Circle become household names during the IPL season because of its massive fan base and extensive media coverage.

:chart_with_upwards_trend: Revenue from the Indian fantasy sports industry grew 31% to reach ₹6,800 crore in FY22 and is expected to cross ₹25,240 crore by FY27 at a 33% compound annual growth rate.

These online gaming platforms organise contests where people can participate by putting in money and if they win, they receive cash rewards.

Now, such winnings were earlier taxed similar to winnings from lotteries and other games. However, new sections in the Income Tax Act were introduced in the Budget 2023 specific to taxation on online gaming to differentiate it from others.

So, how are the winnings taxed?

Your winnings from Dream11 or any other fantasy sports app will be taxed at a flat 30% as per section 115BBJ. Here, the company is liable to deduct this 30% in the form of TDS (u/s 194BA) whenever you withdraw any of your winning amounts.

Earlier, there was a threshold limit of ₹10,000 and TDS was applicable on the winnings only if they crossed this threshold. But, once the new section was introduced, this limit was removed. This means that even if you win as little as ₹100, you’d have to pay ₹30 as TDS.

Moreover, TDS shall be applicable on net winnings at the time of withdrawal or at the end of the financial year, whichever is earlier.

This is not all though. In August 2023, the GST council also brought in a change in the GST rates on online gaming.

What is the new GST rule on Online Gaming?

The GST council imposed a GST of 28% on online gaming platforms from 1st Oct 2023.

While there was an 18% GST earlier as well, that was payable on the revenue that these gaming apps would generate through their contests.

But, after the amendment, the increased GST of 28% would be applicable to the entire pool money rather than the revenue.

Now, this liability would arise for the players, which means, to participate in a game for ₹100, you would have to deposit ₹128 (₹28 as GST).

However, to reduce the impact of this rule on the users, companies like Dream11 did come up with a workaround. They started offering discount points equivalent to the GST amount using which players can utilise the entire deposit amount to enter a contest.

Here’s a video for you!

Are fantasy sports legal in India?

With the rising popularity of apps like Dream11, concern does arise about whether such use of money is legal or not.

Well, as of now, these fantasy sports apps claim that the contests are a game of “skill” and not “chance” and winning depends on the player’s knowledge, attention, and execution.

Hence, they are considered a legitimate business and not “gambling” which is based on sheer luck. However, some states have individually banned such online games arguing that they are no different than betting.

What fantasy cricket app do you prefer?
  • Dream11
  • My11Circle
  • MPL
  • Any other
0 voters

Suppose if I deposited 10000 in online card games application. I got bonus of 1000 from application. Now I entered a contest for 10000 with other player. Out of 20000 thousand I won 19000 and 1000 was deducted as commission by service provider. Now I have 20000 in my account including bonus. I withdraw 10000 and have 10000 in my card games application. Now my gross winning is 19000 including bonus.
I again played game for 10000 with money in my card game wallet and lost. I again added 10000 to my card game wallet from my bank which I withdrew earlier and played again game for 10000 and lost again. Now my net earnings is minus 10000 (loss) . Do I need to show gross earnings in my income tax return as income from other sources and pay tax at 30 percent
on gross earnings or do I have not to pay tax.

Hey @Kishor_Raut,

TDS at the rate of 30% is applicable on winnings from such online games. This TDS is applicable when you withdraw your winnings and transfer them to your bank account. Moreover, if you do not withdraw the winnings before the end of the financial year, then TDS will be deducted even if you do not withdraw your winnings.

If TDS was deducted, you will have to report your winnings while filing the ITR.

Hope this helps!