The world of online fantasy sports gaming, exemplified by platforms like Dream11, My11Circle, and MPL, has exploded in popularity in India. As millions participate and win real money, it's crucial to understand the tax implications of these winnings in 2025. The Indian government has taken steps to regulate financial transactions and user data protection for digital platforms, including online gaming platforms. This article explains how your fantasy game winnings are taxed in 2025.

Taxability of Online Gaming Winnings

In India, income earned from online gaming apps is taxable. According to Section 115BBJ of the Income Tax Act, winnings from online games are considered "Income From Other Sources" and are subject to a flat tax rate of 30%, plus a 4% cess and applicable surcharge. This applies to winnings in cash or kind from platforms like Winzo, Dream11, and MPL. This income is to be disclosed under the head “Income From Other Sources”.

Tax Deduction at Source (TDS)

Section 194BA of the Income Tax Act mandates a Tax Deduction at Source (TDS) at a rate of 30% on net winnings from online gaming apps. TDS is deducted by the platform either at the time of withdrawal or at the end of the financial year, whichever is earlier. This rule applies to all residents, without any threshold exemption.

How Net Winnings are Calculated

Net winnings are calculated as the difference between the total withdrawals during the year and the total deposits made during the year, excluding previous winnings already taxed. Here's a simplified formula:

Net Winnings = Total Withdrawals - Total Deposits

For example, if you deposit ₹20,000 on Dream11, win ₹80,000, and then withdraw ₹50,000, the TDS will be calculated as follows:

• Net winnings at withdrawal = ₹50,000 (withdrawal) – ₹20,000 (deposit) = ₹30,000
• TDS = 30% of ₹30,000 = ₹9,000
• You receive ₹41,000 in your account.

Important Considerations

• No Deductions or Exemptions: No deductions under Section 80C to 80U of the Income Tax Act or rebates under Section 87A are allowed against online gaming income. The basic income exemption limit is not applicable.
• Filing ITR is Mandatory: Any person winning prize money from online game apps must file an Income Tax Return (ITR) for the year in which they earned the winnings. This is required even if the person's income is below the basic exemption limit.
• Losses Cannot be Adjusted: Losses from online games cannot be adjusted against winnings for tax purposes.
• GST on Entry Fee: Besides income tax, a 28% Goods and Services Tax (GST) is applicable on the entry fee or the amount deposited.

Tax Compliance

Even if TDS has been deducted, you still need to comply with the following:

• File your ITR for the financial year, reporting the full winning amount as income.
• Verify TDS in Form 26AS, which reflects taxes paid on your behalf.
• Ensure no mismatch between the tax credit statement and the platform's deduction.

Industry Impact and Government Regulations

The recent changes in tax policy, including the GST hike on online real-money gaming, may lead to a decline in revenue for the fantasy sports industry in FY25. However, the industry is expected to recover in FY26. The government is strengthening regulations for online gaming to ensure transparency and user safety. The Ministry of Electronics and Information Technology (MeitY) has issued blocking directions for online betting and gambling websites.

Potential Challenges and Disputes

There is ongoing debate and legal challenges regarding the taxation of online games, particularly concerning the classification of skill-based games. The Supreme Court of India is examining whether real-money online games that are traditionally considered skill-based should be taxed as gambling when money is wagered. The dispute also involves whether the 28% GST should be applied to the entire contest entry amount or only to the platform fees.