Key Provisions related to Online gaming and income tax

1. Flat 30% Tax Rate : Winnings from online gaming platforms like Dream11, RummyCircle, MPL, and others are taxed at a flat 30% under Section 115BBJ of the Income Tax Act — no basic exemption or deductions applicable 
2. Mandatory Filing of ITR : Even if your total income (excluding gaming earnings) is below ₹2.5 lakh, you're still required to file an Income Tax Return if you’ve earned from online gaming 
3. TDS by Platforms : Gaming platforms must deduct TDS at 30% on net winnings either at withdrawal or by the financial year-end (whichever is earlier). These deductions are recorded in your Form 26AS and Annual Information Statement (AIS), allowing you to claim TDS credit when filing your ITR 
4. New Compliance Measures via the Online Gaming Bill : The Online Gaming Bill mandates that platforms ensure transparent reporting. Users are now required to declare such income separately—under “Income from Other Sources” or “Business Income,” based on the nature of their gaming activity.
5. Penalties for Non-Compliance : If you fail to report gaming income properly:

• Tax notices may be issued for mismatches in SFT (Statement of Financial Transactions).
• Returns can be marked defective or assessments reopened.
• Penalties ranging from 50% to 200% of the tax due can be imposed, plus interest 
• Opportunity to Rectify via Updated Return (ITR‑U)

You can file an Updated Return (ITR‑U) under Section 139(8A) with a window now extended to four years, courtesy of Budget 2025. However, this comes with additional tax liabilities:

• Within 12 months: 25% of additional tax
• Within 24 months: 50%
• Within 36 months: 60%
• Within 48 months: 70%

SUMMARY