Failing to report Dream11/RummyCircle income? You could face 200% penalty

Tax on Dream11 and online card games: 30% flat rate, no deductions allowed

As fantasy sports and online card games gain popularity in India, lakhs of users are earning money on platforms like Dream11, RummyCircle, MPL, and others. But while the thrill of winning may be exciting, many players overlook the tax implications—and that can land them in trouble with the Income Tax Department.

 

According to the Income Tax Act, winnings from online games are subject to a flat 30% tax under Section 115BBJ, with no basic exemption limit or benefit of deductions. This means that even if your total income is less than ₹2.5 lakh in a year, you still must file an Income Tax Return (ITR) if you’ve earned from online gaming.

 

 

TDS on Online Gaming Winnings

 

"Platforms like Dream11 and other online gaming operators are obligated under the Income-tax Act to deduct TDS at 30% on net winnings at the time of withdrawal or at the end of the financial year, whichever is earlier, and report the deduction against the user’s PAN. These deductions appear in the taxpayer’s Form 26AS and Annual Information Statement (AIS), enabling users to claim credit when filing returns. The recent Online Gaming Bill has tightened compliance, making it mandatory for platforms to maintain transparent reporting and for users to disclose such income separately under “Income from Other Sources” or “Business Income,” depending on scale and regularity," explained Aditya Bhattacharya, Partner, King Stubb & Kasiva, Advocates and Attorneys.

 

• These deductions are linked to the user’s PAN and appear in Form 26AS and the Annual Information Statement (AIS).
• Users can claim credit for this TDS while filing their ITR.
• The recent Online Gaming Bill has tightened compliance, requiring operators to maintain transparent reporting and users to disclose winnings separately in their ITR.
• Importantly, any mismatch between what a user reports and what platforms disclose through SFT (Statement of Financial Transactions) can trigger scrutiny or tax notices.

 

Tip: Preserve platform statements, TDS certificates (Form 16A), and transaction records for your own safety.

 

"Given the extensive use of SFT (Statement of Financial Transactions) reporting by platforms, any mismatch between a user’s declared income and the records submitted by operators can trigger scrutiny or notices. To mitigate this, users should preserve platform statements, TDS certificates (Form 16A), and transaction records. Even small or casual gamers should ensure compliance by cross-checking their 26AS/AIS and filing returns if winnings plus other income exceed taxable limits. For those with minimal or occasional earnings, disclosing such amounts transparently—without overcomplication—helps avoid future tax queries while ensuring legal compliance," explained Bhattacharya.

 

Key Compliance FAQs

 

1. Do I need to file an ITR if gaming income is below ₹2.5 lakh?

 Yes. Under Rule 12BA and Section 115BBJ, filing is mandatory even if winnings are below the basic exemption limit.

 

2. From when does TDS apply?

 From the first rupee of net winnings withdrawn or calculated at year-end (Section 194BA).

 

"In terms of Section 194BA, the gaming intermediary or the platform needs to deduct TDS of 30% on the net winnings starting from the first rupee withdrawn or net winnings at the end of financial year, whichever is earlier, thereby preventing the players from avoiding TDS if money is not withdrawn," said Rajarshi Dasgupta, Executive Director - Tax, AQUILAW

 

3. How are net winnings calculated?

 (Withdrawals + Closing balance – Opening balance – Entry fees).

 

4. Can I adjust gaming losses against winnings?

 No. Gaming losses cannot be set off against winnings, against other income heads, or carried forward. For example, if you won ₹50,000 but lost ₹70,000 in the same year, the ₹50,000 winnings are still taxed at 30%.

 

5. Which ITR form should be used?

 

Salaried individuals → ITR-2 (report under “Income from Other Sources”).

 

Those running gaming as a business/profession → ITR-3.

 

ITR-1 and ITR-4 cannot be used to report gaming income.

 

6. Are there special reporting fields?

 Yes. Disclose winnings under “Other Income – Section 115BBJ” and in Schedule SI (Special Rates). TDS must be shown in Schedule TDS.

 

" While the profits need to be reported at a gross level under the head Other Sources as ‘Any other income – Section 115BBJ”, appropriate disclosures are also required in Schedule SI – Special rated income to be taxed at 30%. Further, TDS deducted, if any, shall be reported in Schedule TDS. Lastly, Schedule Part B – TI (Total Income) and TTI (Tax on Total Income) shall automatically reflect such income and the tax liability thereon," said Dasgupta.

 

Penalties for Non-Compliance

 

Failing to disclose gaming income can lead to:

 

Mismatch notices under Section 143(1)(a).

 

Defective return notices under Section 139(9).

 

Information requests under Sections 133(6) or 131.

 

Reopening of assessments under Section 148.

 

Penalties include 50–200% of the tax due, plus interest under Sections 234A/B/C. In severe cases, prosecution may also apply.

 

What If You Missed Reporting?

 

The Income Tax Act allows you to file an Updated Return (ITR-U) under Section 139(8A). Budget 2025 extended the filing window to four years from the end of the assessment year, but with steep penalties:

 

Within 12 months → 25% additional tax

 

Within 24 months → 50% additional tax

 

Within 36 months → 60% additional tax

 

Within 48 months → 70% additional tax

 

"The said time period of 2 years has been extended to 4 years through Budget 2025.However, there are additional riders to the said extension. 25% of the additional tax declared needs to be paid if ITR-U is filed within 12 months of the end of assessment year. Similarly, 50% of additional tax, 60% of additional tax and 70% of the additional tax needs to be paid for filing ITR-U within 24 months, 36 months* and 48 months* of the end of assessment year respectively. Interest shall also be applicable. An updated return can be filed only once," said Dasgupta.

 

What kind of tax notices or prosecutions can one face for failing to report gaming income accurately? 

"It can have serious consequences, as the Income Tax Department can easily identify discrepancies through data from gaming platforms. You may receive an income tax notice, and face penalties of 50% for under-reporting or up to 200% for misreporting income under Section 270A of the Income Tax Act. Additionally, you will be liable to pay interest on any unpaid tax. In cases of significant tax evasion, you could even face prosecution and potential imprisonment. The best way to avoid these issues is to accurately declare all gaming profits and reconcile them with your Form 26AS," said Ritika Nayyar, Partner, Singhania & Co.