Are you also a gaming buff? Do you love playing online fantasy games? Did your Dream11 team just win a match?
Well, if you are into online fantasy games and you earn from it, know how you maybe taxed for it.
The Public Gambling Act, 1857 (PGA) regulates all kinds of betting and gambling. According to the act betting and gambling is prohibited on games of chance.
So, does that mean you have been involved in illegal activities so far?
The answer to your question is NO. Here is where the concept of Online Fantasy Games comes in. Now, the PGA allows betting and gambling on games of skills but not on games of chance.
Various courts have reasoned that a user’s use of ability-based superior intelligence, judgement, and focus is crucial in determining the aspect of skill in fantasy games. Also, the outcome is independent of whether a single team wins or loses in a real-world game. Hence, betting and gambling in fantasy games is legal. So, Game on?!
Tax Implications in Fantasy Sports
Fantasy sports and online betting winnings are taxable under Section 115BB of the Income Tax Act (ITA). They come under the head ‘Income from Other Sources’. The standalone provision includes winnings from lottery, crossword puzzle, horse race, card games, betting, gambling, or any other games. Further, Section 58(4) of the ITA provides that no deduction or expenditure is allowed to be claimed against such income.
Tax on Prize Money and Winnings
You are liable to pay taxes on the entire amount of winning at a flat rate of 30%. This rate is exclusive of cess and surcharge without the benefit of basic exemption limit (usually, INR 2,50,000). If your winnings exceed INR 10,000 per contest, the platform paying out the amount will deduct TDS.
The said deductions will be made under section 194B of the ITA. The TDS deducted and deposited on your behalf by the online gaming platform, will be reflected in your Form 26-AS. You claim the tax credit when while filing your ITR.
No Deduction or Expenditure Allowed
It is important to note that the income tax is to be paid on the entire winnings. No deduction in respect of any expenditure or deduction is allowed.
While the word “winnings” was established by the CBDT in its circular no. 240 of 1978 to mean gross winnings minus the sum expended in the form of a bet, the definition was changed in 1995 when Section 58(4) of the ITA was enacted. It has now been decided that no such bet paid/entry fee expenditure would be permitted as a deduction.
With online fantasy sports betting is legal in India, you should be mindful of the aforesaid tax implications while filing your income tax returns.
Got a question? Shoot’em on TaxQ&A and we promise to answer them all in the simplest way!
Hey @HarishMehta
No, Under Section 58(4), no tax exemption or deduction can be claimed on winning cash or assets as a prize from a game show, lottery, etc.
You can read more about it here:
Hope this helps!
Hi @Vitalstatics
Only the net income from online gaming shall be taxable. However, no deduction in respect of any expenditure or allowances in connection with such income shall be allowed.
Further, the provisions of the Income Tax Act, 1961 do not permit set off and carry forward of losses against gains from winning from lotteries, crosswords, puzzles, card games or other gambling.
If your net winning from such gaming exceeds INR 10,000, they would deduct TDS at 30% and credit the remaining amount to your account.
Hope this helps
@Sakshi_Shah1 can you help?
Hey @Wolf_Roolf
No loss can be set off against income from winnings from lotteries, crossword
puzzles, card game, and any other game of similar nature. Thus, you must report income of INR 10,000 and pay tax on the same at the rate of 30%.