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For income tax reasons, lottery winnings, internet gaming profits, online sports betting profits, etc., are classified as casual income.
The use of online fantasy sports apps for betting has grown significantly.
With the Indian Premier League (IPL) in full swing, many individuals are making money with sports betting apps like Dream11, My11Circle, and others. Few people are aware of the income tax regulations on profits from these sports applications, though, and the possible consequences of failing to report this revenue to the tax authorities.
Meanwhile, Tax professionals claim that for income tax reasons, winnings from online gaming, online sports betting, the lottery, etc., are classified as casual income.
How much is taxed on profits made using online fantasy sports apps?
Income from online gaming apps is taxed for all individuals in India. According to section 115BBJ of the Income Tax Act, money earned in cash or kind from online gaming apps such as Winnzo, Dream11, MPL, etc. is subject to taxation under the heading of “Income From Other Source,” and taxes at the 30 per cent rate, which includes a 4 per cent cess and a surcharge, will be imposed appropriately.
The Income Tax Act’s Section 194BA stipulates a 30 per cent tax deduction at source on net wins from these kinds of online gambling applications. Previously, tax deductions were only available for earnings over Rs. 10,000. Such a barrier was eliminated from the income tax law in the Budget 2023. Beginning in FY 2023–2024, income from online gambling apps is subject to taxation under section 115BBJ of the Income-tax Act. (as amended by the Finance Act of 2023)
Reportedly, tax is deducted at the source when you win on these online gaming platforms before the system deposits your earnings into your bank account. TDS is computed on the sum of the prize’s cash and non-cash components. But only the cash portion is deducted.
Before they transfer the winning sums to you, the payer must ensure that you have paid the necessary taxes to the government on such income, just in case the cash component that is due to you does not cover the TDS that is applicable on your winnings.
A TDS deduction will be made after the current fiscal year if you choose not to withdraw your winnings for whatever reason. Furthermore, profits from internet gaming are exempt from Section 206 AB. TDS at a higher rate is therefore not applicable even if you do not file an ITR.
Impact of Taxes on Online Gaming Winnings
Online games are those that users can access via computers or other internet-connected devices. At the time of withdrawal or after the fiscal year, whichever comes first, winnings from certain online games are subject to a 30 per cent TDS.
Additionally, under section 115BBJ, the income is taxed at a flat rate of 30 per cent on the taxpayer’s tax return as casual income. This revenue must be reported under the “Income From Other Sources” heading. Nonetheless, the taxpayer may claim a credit for the TDS paid when submitting their tax return.
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Delhi, India, India
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