Summary of this article
New 2025 bill bans real-money gaming apps like rummy, poker, fantasy sports.
Winnings taxed at 31.2 per cent flat rate, with surcharge on Rs 50 lakh+ income.
Misreporting can trigger penalties up to 200 per cent under Section 270A.
Report winnings under “Other Sources” and maintain full transaction records.
The Promotion and Regulation of Online Gaming Bill, 2025, signals a decisive shift in India’s digital gaming space. The law places a blanket ban on real-money games such as fantasy sports, rummy, and poker. With this move, the government is responding to mounting worries about gambling-like behaviour, financial losses among young users, and wider security risks linked to such platforms.
“A variety of legitimate alternatives continue to exist, ranging from competitive e-sports and online skill-based contests unaccompanied by pecuniary stakes, to casual and subscription-based gaming platforms which monetise through advertising or paid memberships rather than wagering,” says Tushar Kumar, advocate, Supreme Court of India.
Even state-sanctioned lotteries, though narrow in scope, remain permissible subject to their own stringent regulatory controls and the imposition of tax at source.
“However, this regulatory shift also brings important compliance responsibilities for individuals who earned from such platforms before the ban,” says Abhishek Bansal, founding partner, Acumen Juris.
How Is Such Income Taxed
Such income is usually taxed at a flat rate of 30 per cent, increased by an additional four per cent towards health and education cess, making the effective rate 31.2 per cent. “If the prize money runs into very high amounts, the tax outgo doesn’t stop at the flat rate. Once winnings cross Rs 50 lakh, and again at the Rs 1 crore mark, an additional surcharge gets added to the total liability. These winnings must be reported under the "Income from Other Sources" head in the ITR,” says Ritika Nayyar, partner, Singhania & Co.
Penalties For Misreporting
As with any other income, there are penalties for underreporting or misreporting. You may receive an income tax notice and face penalties of 50 per cent for under-reporting or up to 200 per cent for misreporting income under Section 270A of the Income Tax Act. “On top of the unpaid amount, interest keeps piling up until the dues are cleared. And if the department finds deliberate evasion, the matter can move beyond penalties, with the possibility of prosecution, and in extreme cases, even jail time. To avoid such issues, one must reconcile and confirm the gaming profits from your Form 26AS,” says Nayyar.
What To Keep In Mind
As we have seen, all winnings must be reported under “Income from Other Sources” in your ITR. The winnings are taxed at a fixed rate, no matter which income slab you fall under, and the final bill also includes surcharge and cess. “Even if gaming platforms deduct TDS, filing your ITR remains mandatory. It is important to maintain transaction statements, e-wallet records, and receipts as proof of earnings,” says Bansal.
It is important to report all pre-ban winnings clearly, stay clear of unregulated platforms, and migrate to safe, government-approved gaming alternatives.
