Tax on Winnings From Dream11, MPL and My11Circle

Over the years, the trend of placing bets on online fantasy sports apps has increased rapidly. For example, whenever the Indian Premier League takes place, people all over India start placing bets on the outcome of upcoming matches. 

As per court rules, these activities are legal and thus are liable for taxation. So, if you are thinking of placing a bet on your favourite team, keep reading this article. You will get to know the applicable tax rates and much more!

What is the Tax Rate on Earnings from Online Fantasy Sports Apps?

Section 194BA of the Income Tax Act prescribes a tax deduction at source at the rate of 30% on net winnings from such online gaming app. Earlier, tax was deductible only if the earnings crossed Rs.10,000. Budget 2023 has removed such a threshold from the income tax law. Income from online gaming apps is taxable under section 115BBJ of the Income-tax Act w.e.f FY 2023-24 (inserted vide Finance Act 2023)

Such income would be taxable under the head “Income from other sources”. 

So, when you win bets on such virtual gaming platforms, tax is deducted at the source before the system transfers your winnings to your bank account. If the prize consists of cash and non-cash components, TDS is calculated on the combined value of both. However, the deduction only takes place from the cash part. Just in case the cash component payable to you does not cover up for the TDS applicable on your winnings, the payer has to make sure that you have paid the requisite taxes to the government on such income before they release the winning amounts to you.

If you do not withdraw your winnings for some reason, a TDS deduction will occur when the ongoing financial year ends. Furthermore, Section 206 AB is not applicable in the case of earnings from online games. Thus, even if you do not file an ITR, TDS at a higher rate is not applicable. 

Fantasy Sports Apps in India

Here are some of the top Indian fantasy sports apps: 

• Dream11 

Dream 11 is one of India’s largest fantasy sports platforms. It has over 120 million users, and you can play games like online cricket, football, basketball, rugby, etc. You can build your own team and play against other players to win cash rewards. 

• MPL 

Mobile Premier League (MPL) is another giant in the Indian eSports arena. You can play various fantasy sports games like cricket, rummy, 8-ball pool, and card games. There are several tournaments and cash contests where you can compete against live players and win cash. 

• My11Circle

My11Circle is a digital gaming app for playing fantasy cricket and football. You can use your analytical skills to create the perfect team and enter small, mega and private contests to win cash prizes.  

Is Betting on Online Gaming Platforms Legal in India?

India does not have any federal laws prohibiting online gambling.  The Public Gambling Act of 1867 prohibits placing wagers on all games which are based on chance, barring games of skill and lotteries. It was passed before the internet came into existence and thus has no mention of online gambling. 

Moreover, the Information Technology Act of 2000 also does not provide information on the same. Thus, most Indians freely place bets on online fantasy gaming platforms. 

However, states can develop their own laws for regulating or banning such activities. Nagaland, Meghalaya and Sikkim have licensing regimes and gaming laws in effect. Moreover, Nagaland has a licensing board for sports betting and online casino gaming. 

In 2020, Andhra Pradesh and Telangana completely banned online gambling and any such games involving real money. Also, in 2021, Tamil Nadu and Karnataka imposed a blanket ban on online gaming. However, the High Courts of both states declared these measures unconstitutional and brought them to an end. 

Furthermore, the Ministry of Electronics and IT has recently declared that its legislation draft on online gambling is ready for review. It includes measures to prevent minors from taking part in such activities. There is also the mention of appointing a chief compliance officer who will look into several factors like player verification, game content, etc.

Thus, it can be said that currently, online gambling in India is in a grey area. 

Final Word  

Given the current situation of online fantasy gaming apps regarding their legality, it is difficult to say how things may go. Thus, it is advisable that if you decide to place bets on such platforms, you do it in moderation. Moreover, given that cash prizes are won by placing wagers, it is a good practice to dedicate only an amount you can afford to lose.