Updated on: May 16th, 2023
5 min read
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!
Section 194BA of the Income Tax Act states that earnings above Rs.10,000 via online gaming apps fall under “Income from Other Sources”. Thus, it is applicable for a 30% Tax Deduction at Source (TDS) on the net earnings.
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.
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.
Here are some of the top Indian fantasy sports apps:
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.
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 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.
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 has no 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.
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.