⚖️ 10 GST Notices You Might Receive and How to Respond Professionally

Goods and Services Tax (GST) compliance is integral to running a business in India. However, due to frequent changes in law, return mismatches, or technical errors, taxpayers may receive various types of GST notices from the department. Understanding the nature of these notices and how to respond correctly is crucial to avoid penalties and ensure compliance.

 

Below are the Top 10 Common GST Notices, their meanings, causes, and professional response strategies.

1. 📩 Notice for Non-Filing of GSTR-3B (U/S 46 of CGST Act)

Reason Issued:
Failure to file monthly/quarterly summary return GSTR-3B within the due date.

Implication:
Penalty under Section 47, interest on tax liability, and possible suspension of GSTIN.

How to Respond:

• File the pending GSTR-3B return immediately.

• Pay applicable late fees and interest via DRC-03 if not auto-calculated.

• Ensure timely filing going forward to avoid system-generated notices.

2. 🔍 Mismatch Between GSTR-1 and GSTR-3B

Reason Issued:
Mismatch in outward supply details between GSTR-1 (invoice-wise) and GSTR-3B (summary return).

Implication:
Possible tax evasion concerns or under-reporting of liability.

How to Respond:

• Perform detailed reconciliation between GSTR-1 and GSTR-3B.

• If genuine error, correct through amendment in subsequent GSTR-1.

• If already paid correctly in GSTR-3B, explain with working papers.

3. 🧾 Mismatch Between ITC Claimed and GSTR-2A/2B

Reason Issued:
Discrepancy in Input Tax Credit (ITC) claimed in GSTR-3B vis-à-vis auto-populated GSTR-2A/2B.

Implication:
Possible disallowance of ITC and demand notice under Section 73/74.

How to Respond:

• Reconcile ITC claimed with GSTR-2B (as it's now the legally recognized document).

• Provide vendor invoices, payment proofs, and contract terms if ITC is claimed correctly.

• Coordinate with vendors for correction in their GSTR-1 if mismatch is on their part.

4. 📉 Notice for Excess Refund Claimed

Reason Issued:
Department suspects that a refund claim (on exports, inverted duty, etc.) is inflated or inadmissible.

Implication:
Refund rejection, demand for recovery with interest and penalty.

How to Respond:

• Submit detailed refund working, invoice copies, shipping bills, LUTs, and ledger extracts.

• Ensure refund is within permissible limits as per Rule 89.

• Rectify any computation errors voluntarily if identified.

5. ⚠️ Show Cause Notice (SCN) for Ineligible/Fake ITC Claim (U/S 74)

Reason Issued:
Claim of Input Tax Credit without actual receipt of goods/services or involvement in fake invoicing.

Implication:
Demand of tax with penalty up to 100% and possible prosecution.

How to Respond:

• Engage a GST lawyer or professional for drafting reply.

• Submit purchase invoices, goods receipt proofs, transport documents, and vendor GST compliance reports.

• If error was inadvertent, consider opting for voluntary payment under Section 73 (with reduced penalty).

6. 📋 Notice for Scrutiny of Returns (U/S 61)

Reason Issued:
Return selected for scrutiny based on risk parameters or discrepancies noticed.

Implication:
Failure to respond may lead to assessment proceedings under Section 73 or 74.

How to Respond:

• Carefully analyze the scrutiny points raised.

• Submit point-wise reply with supporting documents and reconciliations.

• Use the online "Reply to Notice" function on the GST portal under the "Notices and Orders" tab.

7. ⏱️ Notice for Non-Generation or Expiry of E-Way Bill

Reason Issued:
Transport of goods without valid e-way bill, or goods not delivered within e-way bill validity.

Implication:
Penalties under Section 129, including detention of goods and vehicle.

How to Respond:

• Submit transport documents and delivery challans.

• Provide reasons for delay (natural calamity, vehicle breakdown, etc.) and request waiver.

• Ensure future compliance through internal transport tracking systems.

8. 🧮 Notice U/S 73 for Tax Short Paid or Not Paid (Non-Fraud Cases)

Reason Issued:
Department believes that tax has been underpaid due to unintentional error or omission.

Implication:
Demand for tax with 18% interest and 10% penalty.

How to Respond:

• Review notice in detail and check accuracy of department's computation.

• If error is genuine, consider payment via DRC-03 with written intimation.

• If dispute exists, submit legal reply with evidence, books, and case laws if applicable.

9. 📦 Notice for Non-Reversal of ITC – Payment Not Made Within 180 Days (Rule 37)

Reason Issued:
Claimed ITC but failed to pay supplier within 180 days from invoice date.

Implication:
Reversal of ITC claimed, along with interest.

How to Respond:

• Review vendor payments and reconcile with ageing reports.

• If payment delayed, reverse ITC voluntarily and reclaim once paid.

• Keep communication and payment terms documented in vendor agreements.

10. 🛑 Notice for Cancellation of GST Registration

Reason Issued:
Non-filing of returns, non-operation of business, or use of fake documents during registration.

Implication:
GSTIN may be cancelled suo-motu and ITC reversed.

How to Respond:

• File all pending returns and reply with reasons for non-compliance.

• If genuine business exists, submit proof of activity (e.g., invoices, utility bills, bank statements).

• File application for revocation (REG-21) within 30 days of cancellation.

✅ Professional Tips for Responding to GST Notices

• 📅 Always meet deadlines: Most notices have fixed response timelines (usually 7–30 days).

• 🗂️ Maintain complete documentation: Contracts, ledgers, invoices, and emails may be required as evidence.

• 🛠️ Use the GST Portal effectively: Track notices under "Services > User Services > View Notices and Orders".

• 📞 Consult a GST professional or CA: Especially in SCNs, ITC disputes, or refund rejections.

🧠 Final Thought

GST notices are a part of the evolving compliance environment, but with proper awareness and a disciplined accounting system, they can be effectively managed. At Tax Manthan, we aim to simplify complex tax matters so you can stay focused on growing your business — not battling paperwork.

🔄 Revised Return vs Updated Return: What’s the Difference and When to Use?

Filing your Income Tax Return (ITR) is a critical step toward staying compliant with Indian tax laws. But what if you realize later that there’s a mistake in the return already filed or you missed reporting some income? Don’t worry — the Income Tax Act provides remedies in the form of Revised Return and Updated Return.

Though both serve the purpose of correcting or updating your filed ITR, they are fundamentally different in their scope, timeline, and implications.

 Let’s decode the key differences between Revised Return and Updated Return, and when you should use each.

📌 What is a Revised Return?

A Revised Return is filed to rectify mistakes or omissions in the original return filed under Section 139(1).

🔍 Key Features:

• ✅ Eligibility: You must have originally filed the return within the due date.

• 🕒 Time Limit: You can revise the return before 31st December of the relevant Assessment Year (AY).
  (For AY 2025–26, deadline is 31st Dec 2025)

• Who Can File? Only those who filed their original return within the due date under Section 139(1).

• Number of Revisions: No limit; you can revise multiple times until the deadline.

• Reasons: Mistakes, incorrect disclosures, forgotten deductions, etc. Example: If you filed your return on time for AY 2025–26 and forgot to claim a deduction under Section 80C, you can file a revised return by 31st December 2025.

• 💰 No additional tax liability or penalty unless the revised figures result in higher taxes.

• 🧾 Examples of use:

• Missed reporting an income

• Wrong deduction claimed

• Typographical or clerical errors

📌 What is an Updated Return?

An Updated Return under Section 139(8A) was introduced in Budget 2022 to promote voluntary compliance. It allows taxpayers to declare previously omitted income even after the deadline for revised return is over. And in Budget 2024, this window has been extended to 4 years, a significant relief for taxpayers who discover errors much later.

🔍 Key Features:

• ✅ Eligibility: Any person (whether or not they filed original ITR).

• Who Can File? Any taxpayer—regardless of whether a return was filed previously.

• Purpose: To declare additional income, correct under-reporting, or omissions.

• 🕒 Time Limit: Can be filed within 48 months from the end of the relevant Assessment Year.
  (For AY 2023–24, deadline is 31st March 2028)

• 💰 Extra Cost: You’ll have to pay additional tax:

  • 25% of the tax and interest if filed within 12 months

  • 50% of the tax and interest if filed after 12 months but before 24 months

  • 60% of the tax and interest if filed after 24 months but before 36 months

  • 70% of the tax and interest if filed after 36 months but before 48 months

• ❌ Not allowed when:

• It reduces your tax liability

• It results in a refund

• It involves issues under search/seizure

🔁 Key Differences at a Glance

Aspect	Revised Return	Updated Return
Section	139(5)	139(8A)
Time Limit	Till 31st Dec of AY	Within 48 months from end of AY
Original ITR filing mandatory?	Yes	No
Purpose	Correction of errors	Reporting omitted income
Additional Tax	No	Yes – 25%/50%/60%/70%   of tax + interest
Refund allowed?	Yes	No
Reduces tax liability?	Yes	No
Filing mode	Online	Online (via ITR-U form)

 

🧠 When Should You Use Which?

👉 Use a Revised Return:

• If you've already filed your ITR on time and found an error or omission before 31st December of the AY.

👉 Use an Updated Return:

• If you missed the deadline for filing or revising your return, or you want to voluntarily disclose previously unreported income — even if no return was filed earlier.

✅ Conclusion

Both Revised Return and Updated Return offer a second chance — but the key is timing and intention. While a revised return helps you correct genuine mistakes without penalty, an updated return is meant for honest late disclosures, albeit with a cost.

So, act wisely based on your situation. When in doubt, always consult a tax expert to avoid penalties or notices.

🧾 Need help revising or updating your ITR? Contact the team at Tax Manthan — we’re here to simplify your tax journey!

New Deduction Disclosure Rules for Old Tax Regime Taxpayers in ITR AY 2025–2026 | Extra Disclosures You Can’t Ignore ! Read This Before You File

The Income Tax Department has rolled out the ITR-1 and ITR-4 forms for the Assessment Year 2025–26, introducing several significant updates — particularly impacting taxpayers opting for the Old Tax Regime. These revisions are designed to enhance transparency, improve compliance, and simplify the overall reporting process.

At Tax Manthan, we’ve done the groundwork for you and compiled a comprehensive summary of the major changes in deduction-related disclosures. Whether you’re a taxpayer or a tax professional, staying informed about these updates is crucial to ensure smooth and accurate filing.

What’s New in ITR-1 and ITR-4 for AY 2025–26?

• Enhanced Deduction Reporting: Taxpayers under the Old Tax Regime will now need to provide more detailed disclosures related to their eligible deductions.

• Improved Transparency: These changes aim to minimize errors and discrepancies, facilitating better scrutiny and verification by the Income Tax Department.

• Streamlined Compliance: Clearer reporting requirements will help taxpayers comply easily without facing last-minute confusion or delays.

Why These Changes Matter

The revised forms reflect the government’s ongoing efforts to tighten compliance frameworks and reduce tax evasion. More detailed deduction disclosures ensure that the claimed benefits are legitimate and verifiable.  

In the next section, we’ll break down the major updates you need to know for smooth filing this year.

🔹 1. House Rent Allowance (HRA) – More Disclosures Required

Taxpayers claiming exemption under HRA must now provide the following details:

• Place of Work

• Actual HRA Received

• Actual Rent Paid

• Basic Salary

These fields ensure proper validation of the exemption being claimed.

🔹 2. Section 80C – Investment Proof

For deductions under 80C (LIC, NSC, PPF, etc.), the following must now be disclosed:

• Policy Number or

• Document Identification Number

🔹 3. Section 80D – Health Insurance Deduction

New mandatory disclosures for claiming health insurance premium deductions:

• Name of the Insurance Company

• Policy Number

This change helps verify the legitimacy of health insurance claims.

🔹 4. Section 80E – Interest on Higher Education Loan

When claiming this deduction, the following details are required:

• Loan Sanctioning Institution

• Bank Name

• Loan Account Number

• Date of Loan Sanction

• Total Loan Amount

• Outstanding Loan as on 31st March

🔹 5. Section 80EE – Interest on Loan for First-Time Home Buyers

Mandatory fields include:

• Lending Institution

• Bank Name

• Loan Account Number

• Sanction Date

• Total Loan Amount

• Outstanding Balance as on 31st March

🔹 6. Section 80EEA – Interest on Loan for Affordable Housing

Mandatory fields include:

• Lending Institution

• Bank Name

• Loan Account Number

• Sanction Date

• Total Loan Amount

• Outstanding Balance as on 31st March

🔹 7. Section 80EEB – Interest on Electric Vehicle Loan

In addition to standard loan details, you must now also furnish:

• Vehicle Registration Number

This will help the department track EV-related deductions more accurately.

🔹 8. Section 80DDB – Medical Treatment for Specified Diseases

New requirement:

• Name of the Specified Disease

Previously, just a certificate was enough. Now, clear identification of the illness is mandatory.

📌 Important Note

These changes signify the Income Tax Department’s continued effort to streamline tax filings and reduce fraudulent claims. Taxpayers under the Old Tax Regime should ensure they:

• Maintain accurate documentation

• Collect all necessary proofs

• Verify disclosures before submitting their ITR

Filing accurate and complete returns will reduce the risk of notices and ensure smooth processing of refunds.

✍️ Tax Manthan Insight

These updates reflect a stronger push towards comprehensive verification and document-based deductions. If you’re planning to file under the Old Tax Regime, we highly recommend that you start collecting all relevant details and documents well in advance.

✅ Stay tuned with Tax Manthan for more such updates, analysis, and expert tips to keep your tax game strong and compliant. Click Here to Join WhatsApp Channel

🔁 Feel free to share this post with fellow taxpayers and professionals!

🚨 Delay in GSTR-3B Filing by Even 1 Day Can Cost You ₹50,000! | A Wake-Up Call for GST Dealers

⚠️ Introduction

In a recent wave of enforcement actions, the GST Department has started issuing penalty notices of ₹50,000 (₹25,000 CGST + ₹25,000 SGST) for even a one-day delay in filing GSTR-3B returns. This alarming development is based on the general penalty provisions under Section 125 of the CGST Act, and it is catching many small dealers and MSMEs off guard.

This article dives into a real case study, outlines the legal provisions, and provides practical guidance for all GST-registered businesses to avoid such hefty penalties.

 

📚 Case Study: Mr. A – A Small Trader Facing Big Trouble

• Profile: Mr. A is a GST-registered trader with an annual turnover of ₹60,00,000 and a yearly profit of ₹4,50,000.

• Issue: He failed to file GSTR-3B for August by the due date (20th September).

• Outcome: The proper officer issued a show cause notice under Section 127, proposing a penalty of ₹50,000 under Section 125 of the CGST Act.

This penalty is over 11% of his annual net profit, a significant blow to a small business.

📜 Relevant Legal Provisions

✅ Section 39(1) – Monthly Return Filing

Every registered person must file GSTR-3B monthly (or quarterly under QRMP), disclosing tax liability, ITC, and other particulars.

✅ Section 125 – General Penalty

“Any person who contravenes any provisions of this Act for which no penalty is separately provided shall be liable to a penalty which may extend to ₹25,000.”

Both CGST and SGST laws have identical provisions, resulting in ₹50,000 total penalty.

✅ Section 127 – Discretionary Penalty

The officer can impose penalties after giving a reasonable opportunity to be heard, provided the case is not already covered under Sections 62, 63, 64, 73, 74, 129, or 130.

🧾 Why This is Concerning

• Traditionally, late fees (₹50/day or ₹20/day for nil returns) and interest were levied for late filing.

• Imposing a discretionary penalty in addition to the late fee is being seen as harsh and excessive, especially on first-time or non-habitual defaulters.

• This move may set a dangerous precedent affecting small businesses and MSMEs across India.

🛡️ What Should Mr. A (and You) Do?

1. File a Reply: Respond to the show cause notice within the time limit.

2. Include Valid Justifications:

   • System errors (attach screenshots with timestamps).

   • Health emergencies, financial hardship, etc.

3. Emphasize Non-Malicious Intent: Prove it was an unintentional delay, not tax evasion.

4. Consult a GST Practitioner/CA for a well-drafted, legally sound response.

📌 Key Takeaways for All GST Dealers

• ✅ Always file GSTR-1 and GSTR-3B on time. Avoid "casual compliance" habits.

• ✅ Don't wait for the GSTR-3B deadline to file GSTR-1 — they have independent deadlines.

• ✅ Document technical issues (take screenshots with date & time) if the portal malfunctions.

• ✅ Know your rights — penalties under Section 125 are discretionary, not automatic.

🙏 A Word to GST Authorities

While compliance is crucial, harsh penalties on small businesses for minor or first-time defaults can cripple MSMEs, which are the backbone of our economy. A balanced and lenient approach is the need of the hour — especially when no intent to evade tax is involved.

📝 Final Words

The GST law is evolving, and compliance expectations are becoming stricter. However, awareness and preparedness are the best shields for taxpayers. Don’t let a single day's delay turn into a ₹50,000 regret — file timely, document every hurdle, and consult your tax expert regularly.

🗣️ Have you received a similar notice? Need help drafting a response? Comment below or reach out for support.

🧾 Guide to Filing GST Appeals: Step-by-Step Guide on Form GST APL-01

Filing an appeal under the GST regime allows taxpayers to contest decisions made by GST officers. The process is standardized through Form GST APL-01 on the GST Portal. Taxpayers can contest various orders, such as assessment demands, registration cancellations, enforcement actions, and refund decisions, by submitting Form GST APL-01. Below is a comprehensive guide to assist you through the appeal process.

 

🧾 Who Can File an Appeal?

The following entities are eligible to file an appeal:

• Registered taxpayers under GST who are aggrieved by any order or decision passed by an adjudicating authority.

• Unregistered persons affected by an order (e.g., denial of registration).

• Legal heirs or representatives of a deceased taxpayer.

• Authorized representatives such as GST practitioners, advocates, or tax consultants acting on behalf of the taxpayer.

To file an appeal, the user must have access to the GST Portal and possess the required documentation related to the order being contested.

📄 Types of Orders Eligible for Appeal

Appeals can be filed against the following types of orders through Form GST APL-01:

1. Assessment Orders

   • Demand Orders (with tax liability)

   • Non-Demand Orders (no tax liability but still disputable)

2. Registration Orders

   • Rejection of new registration application

   • Cancellation of existing registration

3. Enforcement Orders

   • Orders passed under enforcement actions (search, seizure, etc.)

4. Refund Orders

   • Rejection or partial sanctioning of refund claims

5. Other Orders

   • Any adjudication order where the taxpayer is aggrieved and has valid grounds for contest

Each of these appeals must be filed within 3 months (90 days) from the date of communication of the original order, with a possible extension of 1 additional month under valid reasons.

📝 Steps to File an Appeal (Form GST APL-01)

1. Accessing the Appeal Form

• Navigate to www.gst.gov.in and log in with your credentials.

• Go to Services > User Services > My Applications.

• Select Application Type as Appeal to Appellate Authority and click on NEW APPLICATION.

2. Selecting the Order Type

• Choose the appropriate Order Type from the dropdown menu, such as:

  • Assessment – Demand

  • Assessment – Non-Demand

  • Registration Cancellation

  • Enforcement Order

  • Refund Order

• Enter the Order Number issued by the adjudicating authority and click SEARCH.

3. Providing Appeal Details

• Select the Category of the case under dispute from the dropdown list.

• Click ADD to include multiple categories if necessary.

• Upload the Annexure to GST APL-01 by downloading the template, filling in the required details, converting it to PDF, and uploading it.

• Enter Disputed Amount/Payment Details, specifying the amount under dispute for each tax head.

• Specify the Pre-deposit percentage (minimum 10% of the disputed tax amount) and make the payment using the available cash or Input Tax Credit (ITC).

• Attach any other supporting documents relevant to your appeal.

• Preview the application to ensure all details are correct.

• Proceed to file the appeal using Digital Signature Certificate (DSC) or Electronic Verification Code (EVC).

4.  📬 Acknowledgment and Status Tracking

• Initial Acknowledgment: Upon electronic submission, you'll receive an email and SMS acknowledgment.

• Final Acknowledgment: Issued after submission of physical documents, indicating the appeal number. The appeal is considered officially filed upon this acknowledgment.

• Status Monitoring: Track your appeal status by navigating to Dashboard > Services > User Services > My Applications, selecting "Appeal to Appellate Authority," and searching within the relevant date range.

🛠️ Filing Reply and Rectification Requests

During Revision Order Proceedings

• Access the ORDERS tab on the GST Portal.

• Click on Initiate Rectification Request against the relevant Revision Order.

• Provide necessary details and submit the request.

During Proceedings and Order of First Appeal

• Navigate to the specific case details under My Applications.

• Click on Reply to submit your response or Initiate Rectification Request as applicable.

• Upload supporting documents and submit the request

📅 Viewing Cause List

• Go to Services > User Services > View Cause List.

• Select the appropriate date range and other filters as required.

• The list of scheduled hearings and related details will be displayed.

🔄 Withdrawing or Re-filing an Appeal

Withdrawing an Appeal

• Navigate to Services > User Services > My Applications.

• Select Application Type as Appeal to Appellate Authority.

• Search for the filed appeal using the relevant date range.

• Click on the ARN hyperlink of the appeal you wish to withdraw.

• If the appeal is withdrawn before admission, it is auto-approved.

• If withdrawn after admission, it requires approval from the Appellate Authority.

Re-filing an Appeal

• If your appeal was rejected at the admission stage or withdrawn, you can re-file using the same Order ID.

• Follow the same steps as filing a new appeal, ensuring all details are correctly entered.

📌 Key Considerations Before Filing an Appeal

• Timely Filing: File the appeal within the stipulated time frame (90 days) to avoid rejection on grounds of limitation.

• Pre-deposit Requirement: Mandatory deposit of 10% of the disputed tax amount must be made before appeal admission. This is non-refundable even if the appeal is dismissed.

• Proper Documentation: Attach all relevant documents, including:

  • Copy of the disputed order

  • Grounds of appeal

  • Supporting invoices or communications

  • Annexure to APL-01

• Legal Grounds: Ensure there is a valid reason (e.g., incorrect tax rate, denial of ITC, procedural lapse) before appealing.

• No Appeal on Consent Orders: Orders passed based on voluntary acceptance or confession are generally not appealable.

• Appeal Filing Fee: While the GST system doesn’t charge a separate fee for filing Form GST APL-01, applicable court fees or professional fees may be incurred.

For more detailed instructions, visit the official GST Appeal Help Section on GST Portal and refer to user manuals and FAQs.

Advisory on reporting values in Table 3.2 of GSTR-3B

In a recent development aimed at easing compliance for taxpayers, the Goods and Services Tax Network (GSTN) has issued an important update regarding the reporting of values in Table 3.2 of Form GSTR-3B. While it was previously announced that the auto-populated data in this table would be locked for editing starting from the April 2025 tax period, GSTN has now decided to keep this field editable for the time being. This decision comes in response to various representations and concerns raised by taxpayers, and is intended to ensure a smoother and more accurate return filing experience.

 

Key Points:

1. Earlier Advisory (April 11, 2025):
   It was previously announced that the auto-populated values in Table 3.2 of GSTR-3B would become non-editable from the April 2025 tax period (returns to be filed in May 2025).

2. Taxpayer Feedback:
   Multiple concerns and representations have been received from taxpayers regarding this change. These issues are currently under review.

3. Current Decision:
   To ease compliance and return filing, Table 3.2 will remain editable for now.
   Taxpayers may:

   • Amend the auto-populated values, if necessary.

   • Ensure that the final reported data is accurate and correct.

4. Future Updates:
   Any changes to this functionality will be communicated separately once finalized and implemented on the GST Portal.

Action for Taxpayers:
Continue reviewing and updating Table 3.2 as needed while filing GSTR-3B for April 2025 and until further notice.

To Join Tax Manthan WhatsApp Channel Click Here

Advisory on Appeal withdrawal with respect to Waiver scheme

In the GST system, taxpayers have the option to withdraw an appeal by filing Form APL-01W (Withdrawal Application). The procedure and outcome of such withdrawal depend on the stage at which the withdrawal is initiated:

 

1. Before Issuance of Final Acknowledgment (APL-02):
   If the withdrawal application (APL-01W) is filed before the issuance of the final acknowledgment (APL-02) by the Appellate Authority, the system will automatically process the withdrawal. Consequently, the status of the appeal application (APL-01) will change from “Appeal Submitted” to “Appeal Withdrawn” without requiring any further approval.

2. After Issuance of Final Acknowledgment (APL-02):
   If the withdrawal application is filed after the final acknowledgment (APL-02) has been issued, the withdrawal will require explicit approval from the Appellate Authority. Upon approval, the appeal status will similarly be updated to “Appeal Withdrawn.”

Relevance to Waiver Scheme under Section 128A

Under the Waiver Scheme provided in Section 128A, it is mandatory that no appeal remains pending before the Appellate Authority against the demand order. In both scenarios mentioned above, once the appeal status reflects as “Appeal Withdrawn”, the condition under Section 128A is considered fulfilled.

Important Action for Taxpayers

While filing a waiver application—or if a waiver application has already been filed—taxpayers are required to upload a screenshot of the appeal case folder clearly displaying the status as “Appeal Withdrawn.” This will serve as evidence of compliance with the requirement under the waiver scheme.

To Join Tax Manthan WhatsApp Channel Click Here

💰 Tax on Online Game Winnings: Dream11, MPL & My11Circle | Know the 30% Tax Rule, ITR Filing & GST Rules in India [2025 Update]

The rise of online gaming platforms like Dream11, MPL, and others has created a new avenue for people to earn money through fantasy sports and other online games. While these platforms offer entertainment and the thrill of winning money, it’s crucial to understand that the winnings are taxable in India. Moreover, tax is deducted at the source (TDS), and the tax regime surrounding online game winnings is specific and evolving.

In this article, we break down the essential points every gamer needs to know about the taxation of winnings from online games and how TDS impacts the amount you take home.

 

1. Taxation on Winnings from Online Games

In India, the Income Tax Act treats winnings from online games, including fantasy sports platforms like Dream11, as "Income from Other Sources". This classification means that such income is taxable under the same category as interest from savings accounts or income from dividends.

The taxation is fairly straightforward:

• 30% Tax on the net winnings.

• The tax is levied on the gross winnings — not on the profit or after deducting the entry fee for the game.

• No exemption is available for winnings from these platforms, regardless of the amount.

Example:

If you win ₹10,000 on Dream11, the tax calculation would be as follows:

• Taxable Income: ₹10,000

• Tax @ 30%: ₹3,000

• Total Tax Payable: ₹3,000

2. Additional Levies: Cess and Surcharge

Along with the 30% base tax, there are additional charges that apply:

• Health and Education Cess: A 4% cess is levied on the total tax amount. So, for ₹3,000 tax, the cess would be ₹120 (3,000 × 4%).

• Surcharge: If your total taxable income (from all sources) exceeds ₹50 lakh, you will be subject to a surcharge. For those earning between ₹50 lakh and ₹1 crore, the surcharge is 10%. For income exceeding ₹1 crore, the surcharge is 15%.

Let’s say your tax is ₹3,000, and you fall in the ₹50 lakh - ₹1 crore category:

• Tax: ₹3,000

• Cess (4%): ₹120

• Surcharge (10%): ₹300

• Total Tax Payable: ₹3,420

So, the final tax payable will be higher if your total income places you in the surcharge bracket.

3. TDS (Tax Deducted at Source) on Winnings

The TDS system comes into play when you withdraw your winnings or at the end of the financial year, whichever comes first. The government has introduced stricter norms regarding TDS on online game winnings:

Before April 2023:

TDS was applicable only if the winnings from a single game or contest exceeded ₹10,000.

From April 2023 Onwards:

A new section 194BA was introduced under the Finance Act, 2023, which now applies:

• TDS of 30% on net winnings.

• The ₹10,000 threshold has been removed, so TDS is applicable on any amount won, even if it’s a small amount.

• The gaming platform deducts TDS on the net winnings after adjusting deposits made by the player.

Example:

• Total Winnings: ₹50,000

• Total Deposits: ₹20,000

• Net Winnings: ₹30,000

• TDS @ 30%: ₹9,000

If the TDS is already deducted at source, you can check your Form 26AS for the credited amount. This credit can be claimed when filing your Income Tax Return (ITR).

4. How to Report Winnings in ITR

You need to declare your online gaming winnings under "Income from Other Sources" in your ITR.

• Gross Winnings must be reported, not the amount after TDS is deducted.

• TDS Credit can be claimed in the ITR, and if TDS exceeds your tax liability, you can claim a refund.

If the TDS deducted is less than your tax liability, you will need to pay the difference when filing your ITR.

Example:

• Winnings: ₹10,000

• TDS Deducted: ₹3,120 (₹3,000 tax + ₹120 cess)

• When filing the ITR, you must report ₹10,000 as income. If your total tax liability is ₹3,500, you will have to pay the remaining ₹380 after accounting for the TDS.

5. No Deductions Allowed

Unlike many other income categories, deductions for expenses such as participation fees or costs incurred for the game are not allowed. For example, if you spend ₹100 to enter a contest and win ₹1,000, you will pay tax on the full ₹1,000, not just the ₹900 profit.

6. GST on Online Gaming

In addition to income tax, Goods and Services Tax (GST) is also applicable to online gaming. Since October 2023, the GST Council has decided to levy 28% GST on the full value of the entry fees placed on online gaming platforms.

This means that if you pay an entry fee to participate in a game, the platform will charge you 28% GST on the entry fee, further increasing the cost of participation.

7. Practical Tips for Online Gamers

• Track your winnings, deposits, and withdrawals to calculate net winnings.

• Always verify TDS through Form 26AS before filing your ITR.

• If your total income is below the taxable limit, and TDS has been deducted, you can file an ITR and claim a refund.

• Be mindful of the surcharge and cess when calculating your tax liability.

• Consult a tax professional if you’re unsure about your tax obligations, especially if you play games on multiple platforms.

8. Penalties for Non-Compliance

Not reporting your gaming income or underreporting winnings may lead to penalties such as:

• Interest and penalties under sections 234B/234C/270A of the Income Tax Act.

• Notices or scrutiny from the Income Tax Department, especially if there are discrepancies between your declared income and Form 26AS.

Conclusion

With the increasing popularity of online gaming platforms, it’s essential for players to understand their tax responsibilities. Winnings from online games are taxable at a flat rate of 30%, with additional cess and surcharge based on total income. Platforms like Dream11 are required to deduct TDS at source, but it's still important for you to file your Income Tax Return (ITR) correctly and pay any additional tax owed.

For online gamers, staying compliant with tax laws is crucial to avoid penalties and ensure a smooth gaming experience. If you’re unsure about your tax obligations, it's always best to consult with a tax professional who can guide you through the process.

To Join Tax Manthan WhatsApp Channel Click Here