Minting money on Dream11, MPL, My11Circle or Paytm First Games? Check tax implications

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The mushrooming of fantasy sports platforms in the last few years has given birth to a new breed of sports followers who have mastered the art of making a quick buck while following their favourite teams and players. IPL has provided these platforms the perfect opportunity to draw new users. So, how are users getting to benefit while watching their favourite players or teams? Let us take a look

How does it work?

In fantasy sports, players assemble imaginary virtual teams of their favourite sport. In India, fantasy sports games platforms like Dream 11, Mobile Premiere League (MPL), My 11Circle, Howzat, Gamezy have gained a lot of popularity. Interestingly, Dream11 became the first online gaming company to enter the unicorn club.

But before investing time and money, one must also know that the winnings are taxed.

Are winnings taxed?

“The winnings from fantasy sports games are taxed under Section 115BB of the Income Tax Act. It clearly states that the winnings from lotteries, crossword puzzles, races will be taxable,” said Rachit Chawla, CEO and founder, Finway FSC.

The tax is calculated in such a way that the player doesn’t get any deduction for expenditure. That means, it doesn’t matter how much money you have spent while playing. There is no tax benefit on that. But your earnings are treated as ‘income from other sources,’ hence, they are taxed under section 115BB.

A note on the Dream11 website states that once the user verifies the personal details, earned money can be withdrawn and can be directly transferred to the bank account.

Dream11’s help desk says: “Tax of 30% is deducted at source when your net winning in a contest is more than ₹10,000. The remaining amount (after tax deduction) gets credited to your Dream11 account as ‘Winnings’. You will also get a TDS certificate ONLY if you’ve verified your PAN card on Dream11.”

The website explains the calculation with an example. Suppose one has joined the contest with Rs 3,000 and won Rs 12,000, then the “net winnings will be (Rs 12,000 – Rs 2,000) = Rs 10,000. There is no TDS for this contest since tax is only applicable when your net winning is more than ₹10,000.”

If the winning amount is Rs 13,000, the “net winning will be (Rs 13,000 – Rs 2,000) =  Rs 11,000 and a 30% TDS will be applicable on Rs 11,000.”

The user can get the TDS certificate within three months from the date of winning. However, “PAN verified Dream 11 account” is a must.