Tax on Winnings from Fantasy Games

In India, there is massive popularity of IPL and with that there is huge growth in low cost data plans, high intelligence in the use of mobile phones. There is also growth in betting industry of Indian Fantasy Sports in last five years. Fantasy Sports arranges online games which is based on the real life events like basketball, cricket and football etc.

As per the Federation of Indian Fantasy Sports, the income of these operators expanded in last few years. Which increased to Rs. 2400 crores in financial year 2020. Also, there was expansion in number or operators there was 10 in 201 and now there is 150 in 2020. There was increase in number of users of fantasy games from 2 million was in 2016 to 100 million now in 2020.

LEGALITY:

Every betting and gambling in India is controlled by the Public Gambling Act, 1867, that forbids all form of gambling activities and also betting on games of chance. The Act does not cover any type of provision which is related to online gamble. Also, there is no particular law for online gambling in India. Online gambling can be of any type such as crossword, card games etc.

In India, there are two different type of games which is games of chance and games on skill. There is totally forbid to participate in any of these games of chance, whereas jurisprudence has some type of specific law for games with skill.

TAX IMPLICATION:

• The above games include some type of money for winning and that will be liable for tax.
• The minimum amount of winnings liable to be taxable is Rs. 10000
• The winning under this type of online betting and gambling are taxable as per the Section 115BB of the Income Tax Act, 1961.
• This income shall be taxed under the head of “Income from Other Source”
• This income has special provision that is related to winning from any card games, betting, crossword puzzle, or any other way.
• Provided that, as per Section 58(4) of the Income Tax Act, states that there will no deduction or deduction of expenditure is allowed.
• Winnings of such income will be taxed at the rate of 30% which doesn’t involve cess and surcharge. This is without the advantage of basic exemption limit.
• Under Section 194B of the Act, the platform who is paying for the winning will have to deduct the TDS. This will be applicable if the winning income is more than Rs. 10,000.
• The TDS which is deducted by the platform will have to be shown in the Form 26AS.
• The critical part of this is that the income tax which is paid on the winning will not be allowed for any deduction of any expenses.

******

Author- Adv.Shivam Kumar
Legel and content Executive, Taxblock India Pvt. Ltd