Taxability of winnings from Dream11 or Online Gambling?

This document covers

1. Online Gambling
2. Dream11
3. Taxability of online gambling income
4. Budget 2023 Changes

1. Online Gambling

Online gambling (or Internet gambling) is any kind of gambling conducted over the internet. This includes virtual poker, casinos, sports betting and other such means. Most of the countries have restricted or banned online gambling. Online Gambling service providers are required to have registration specified by the Government of the countries.

Bettings like cricket betting, online poker, football betting, or a game of chance or skill, bettings became popular in India, but most of these bettings are unregulated in India.

2. Dream11

Dream11 is an Indian fantasy sports platform that allows users to play fantasy cricket, hockey, football, kabaddi, and basketball. It is an online game where users create a virtual team of real-life players and earn points based on the performances of these players in real matches.

A user who scores the maximum points in their joined contests attains the first rank on the leader-board. Dream11 offers free and paid contests. A user has to pay a certain fee to join a contest and can win real cash.

To participate in a Dream11 game, a user must be at least 18 years old and needs to get their profile verified using their PAN.

3. Taxability of online gambling income

Income received through online gambling is taxable in the hands of recipient.

1. Rate of Tax: Income in the nature of online gambling or betting is taxable @ 30% plus surcharge if applicable and Health and education cess @ 4% u/s 115BB.
2. Deduction's u/s Chp VIA: No Deductions under Chp VIA (80C to 80U) are allowed.
3. Claim of Expenses: No Expenditure or allowance can be allowed from such income.
4. Deduction of TDS: TDS needs to be deducted @ 30% if the amount of winning exceeds Rs 10,000. TDS needs to be deducted by the person to whom a specific licence has been granted by the Government.
     NOTE:

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   W.e.f 01st July 2023, there is no threshold for the TDS deduction. TDS needs to be deducted on net winnings at the end of the financial year.

5. Basic Exemption Limit: Basic Exemption Limit of Rs 2,50,000/3,00,000 is not allowed in respect of Gambling earnings.
6. Taxability of winnings received in Kind or partly in Kind: When the winnings are in kind or partly in cash or in kind, the person who is responsible for payment should ensure that the TDS has been paid to Government and then only he should release the winnings

For more information on IT Filing, Expert Consultation related to Taxability on Dream11 and/or other Online betting income, take the Online Tax Service or Call +91 7288 900 900

4. Budget 2023 Changes

Part 115BBJ of the Income Tax Act of 1961 was added in Budget 2023. In accordance with tax regulations, this section specifies the tax rate and computes the net winnings from online gaming.

How to Calculate Net winnings

The formula to calculate net winnings from online games is (A + D) — (B + C)

• A = Aggregate amount withdrawn during the financial year from the user account
• B = Aggregate amount of non taxable deposit made in the user account during the financial year
• C = Opening balance of user account at the beginning of financial year
• D = Closing balance of user account at the end of financial year

The TDS needs to be deducted @ 30% on net winnings at the earlier of the following

1. At the time of withdrawal by the user
2. At the end of financial year