Mohammad Shahid’s Big Win from Dream 11
Mohammad Shahid, a tailor from Chatra district in Jharkhand, recently made headlines after winning around Rs 3 crore overnight on the fantasy gaming platform Dream 11, with just a small entry fee of Rs 49. This significant win has inspired him to start a new business and even purchase a flat in Ranchi, the capital of Jharkhand.
However, Shahid now faces an important responsibility: paying taxes on his winnings. If he fails to do so, he could face serious consequences under the Income Tax Act.
Understanding Tax on Dream 11 Winnings
According to the Income Tax Act, a flat tax rate of 30% is applied to earnings from online gaming and fantasy sports, as stated in Sections 115BB and 115BBJ. Additionally, a health and education cess of 4% and a surcharge may be applicable. When winnings exceed Rs 10,000, a Tax Deduction at Source (TDS) of 30% is automatically deducted by platforms like Dream 11.
If Shahid does not declare his earnings or pay the necessary tax, he may face penalties. For instance, if he has an outstanding tax amount of Rs 1.026 crore, he could incur interest charges of around Rs 12.31 lakh for a year under certain sections of the Income Tax Act.
Potential Penalties for Non-Compliance
If he intentionally hides his earnings, he could face fines ranging from 100% to 300% of the unpaid tax, which could amount to between Rs 1.026 crore and Rs 3.078 crore. Additionally, there could be an extra penalty of up to 50% of the outstanding tax.
In more serious cases, if the outstanding tax exceeds Rs 25 lakh, he could face imprisonment for 6 months to 7 years, as per Section 276C of the Income Tax Act.
Calculating Shahid’s Net Earnings
Let’s break down how much Mohammad Shahid would actually receive after paying taxes on his Rs 3 crore win.
1. **Net Winnings Calculation**:
– Total Winnings: Rs 3 crore
– Entry Fee: Rs 49
– Net Winnings = 3,00,00,000 – 49 = 2,99,99,951 (approximately Rs 3 crore)
2. **TDS Calculation**:
– 30% TDS = 2,99,99,951 × 30% = Rs 89,99,985.3 (approximately Rs 90 lakh)
– Health and Education Cess = Rs 90,00,000 × 4% = Rs 3,60,000
– Total TDS = Rs 90,00,000 + Rs 3,60,000 = Rs 93,60,000 (about Rs 93.6 lakh)
3. **Surcharge**:
– Since his total income exceeds Rs 1 crore, a 10% surcharge applies.
– Surcharge = Rs 90,00,000 × 10% = Rs 9,00,000
4. **Total Tax**:
– Total Tax = TDS + Cess + Surcharge = Rs 90,00,000 + Rs 3,60,000 + Rs 9,00,000 = Rs 1,02,60,000 (about Rs 1.026 crore)
5. **Final Amount Received**:
– Total Winnings = Rs 3,00,00,000
– After Tax Deductions = Rs 3,00,00,000 – Rs 1,02,60,000 = Rs 1,97,40,000 (about Rs 1.974 crore)
In conclusion, after paying a tax of Rs 1.026 crore, Mohammad Shahid would have around Rs 1.974 crore deposited in his account. This win highlights not just the excitement of gaming but also the importance of understanding tax responsibilities.
