In the IPL season, many people are earning money from fantasy gaming apps like Dream11 and My11Circle. But very few people are aware of how income tax is levied on the earnings from these apps and what penalty can be imposed if it is not shown in the ITR. So, if you are also earning money from online gaming, then this news is very important for you. Let us understand in simple language how tax is levied on income from online gaming and what things you should keep in mind.
What is the income from online gaming called
The amount received from platforms like Dream11, My11Circle is called ‘casual income’ under the Income Tax Act. Such income is that which is irregular and one-time. That is, it is not a regular salary or business income. This includes earnings from lotteries, races, card games, game shows, betting, and online games. So, your fantasy league winnings also fall in this category.
How much will be the liability under the Income Tax Act?
Prize money won from apps like Dream11 or My11Circle comes under ‘Income from Other Sources’ and has to be reported under section 56(2)(ib). It is taxed under section 115BB or 115BBJ. This type of income is taxed directly at the rate of 30%. Apart from this, a 4% health and education cess is also added. That is, a total tax of about 31.2% will be levied, whether the rest of your income comes under the tax slab or not. There is no concession on this.
30% will be deducted if you win more than ₹ 10,000
If you win more than ₹ 10,000 in a single transaction from Dream11 or any gaming app, then 30% TDS will be deducted from it. These rules apply to online games under sections 194B, 194BB, and 194BA. The special thing is that there is no limit to TDS on online games, that is, no matter how much is won, TDS will be deducted from it. Therefore, whether the win is big or small, it is important to take care of TDS.
Will there be any tax exemption?
There is no deduction on this type of income. Whether you choose the old tax system or the new one, you will not get an exemption under any section like 80C, 80D. Nor can you deduct any expenses or investments from the income. This tax will have to be paid on the entire amount! That is, the entire amount of your winnings will be taxable.
Will you get the benefit of the basic exemption limit?
If your total income is less than the tax exemption limit (like ₹2.5 lakh or ₹4 lakh), then you will still have to pay tax on the amount won from Dream11. Suppose your total income is ₹2.5 lakh and you have won ₹50,000 from Dream11, then you will have to pay 30% tax on ₹50,000, and it will also be necessary to file an ITR. So, do not think that you will get an exemption if you have less income.
What will happen if gaming income is not shown in the ITR?
If you do not show the earnings from Dream11 or any online gaming app in ITR, and the tax department catches you, then you can be fined from 50% to 200% under section 270A. You may also have to pay interest. Legal action can also be taken for deliberate tax evasion. So, it is very important to report your gaming income correctly.