Dream11 Winners Beware: No Escape from 30% Tax and TDS – Full Guide Inside

Nowadays, the craze for online gaming and fantasy sports is increasing rapidly. Especially in the IPL season, people are earning lakhs of rupees by creating their fantasy teams on apps like Dream11 and MyTeam11. But do you know that tax has to be paid on this income too? Yes, if you are earning money from these apps, then it is called ‘casual income’, and under the Income Tax rules of India, you must pay tax on it. So, if you are also the king of fantasy league, then this information is very important for you.

What is ‘casual income’

The Income Tax Department considers the income from apps like Dream11 and MyTeam11 as ‘casual income’. This means that it is income that is not regular, like your salary or income from business. It is one-time or irregular income, like money received from lottery, online gaming, or betting! Under the Income Tax Act, 1961, it is classified under ‘income from other sources’.

This is explained in Section 56(2)(ib) and Section 2(24)(ix). This simply means that if you have won money by creating your fantasy team on these apps, it will be considered as part of your total income and you will have to pay tax on it.

What is the tax rate

Earnings from these apps are taxed at a flat rate of 30 percent under Section 115BB and Section 115BBJ of the Income Tax Act. No matter how much you have won, it is mandatory to pay 30 percent tax on this income. Apart from this, a Health and Education Cess of 4 percent is also added to this amount. This rule applies to all skill-based games like lottery, crosswords, horse racing, cards, or online gaming.

For example, if you win ₹10 lakh on Dream11, then 30 percent of it i.e. ₹3 lakh will be deducted as tax and you will get only ₹7 lakh. If you get a voucher or any item instead of cash as a prize, then tax is levied on it according to its market value.

What is the rule of TDS

When you win an amount of more than ₹10,000 on platforms like Dream11 or MyTeam11, these companies must deduct 30 percent TDS under sections 194B, 194BB, and 194BA of the Income Tax Act. This means that tax is already deducted from your winning amount, and the remaining amount is transferred to your bank account.

For example, if you have won ₹15,000, 30 per cent of it, i.e., ₹4,500, will be deducted as TDS, and you will get ₹10,500. This TDS is part of your total tax liability, and you can show it in your Income Tax Return (ITR). But remember, if your total earnings are more than the tax exemption limit, you will have to file an ITR even if TDS has been deducted.

How to show this income in ITR

You will have to show the earnings from Dream11 and MyTeam11 in the ‘Income from other sources’ section of your Income Tax Return. It is very important to report this correctly, because if you hide it, the Income Tax Department can send you a notice.

You must check in your Form 26AS or Annual Information Statement (AIS) whether your winning amount and the TDS deducted on it are correctly recorded or not. If you are earning regularly from these apps, then it is also important to check whether you need GST registration or not. If your annual income is more than ₹ 20 lakh, then registration may be required under GST rules.

Will there be jail if you do not pay taxes

If you do not pay tax on the income earned from Dream11 or MyTeam11, then the Income Tax Department can take strict action. If you do not pay taxes, you may have to pay 1 percent interest every month on the outstanding amount. Apart from this, an additional penalty of up to 50 percent can also be imposed.

If the matter is serious, the Income Tax Department can send you a summons or notice. Deliberate tax evasion can also result in a jail sentence of 3 to 7 years. Therefore, if you are earning money from these apps, then it is wise to show it correctly in your ITR and pay tax.

Some important things to keep in mind

It is also important to keep in mind some other things about the earnings from these apps. Firstly, this income is taxed in a different tax slab from your other income. That is, even if your salary or other income falls in a lower tax slab, this casual income will always be taxed at a flat 30 percent rate.

Secondly, if you are winning a small amount, which is less than ₹10,000, then TDS will not be deducted, but you will have to show this income in your ITR. Thirdly, if you are earning lakhs of rupees regularly from these apps, then it can be considered as your permanent income source and you may have to follow GST rules as well.