Under Indian law, Tax Deducted at Source (TDS) is a key element of taxation, especially in online gaming and contest platforms like Lucky Day League (LDL). For skill-based online games, winnings may attract TDS as per section 194B of the Income Tax Act, 1961. Below is an outline of how the TDS policy for LDL can be structured:
TDS Policy for Lucky Day League (LDL)
1. Applicability of TDS under Section 194B of Income Tax Act, 1961
Threshold Limit: TDS is applicable on winnings exceeding ₹10,000 from any online contest or game.
Rate of TDS: The TDS rate for online game winnings is 30% on the amount exceeding ₹10,000.
Non-Exemption: There is no exemption or deduction available under this section for expenses or losses incurred.
2. When is TDS Deducted?
TDS is deducted at the time of crediting the winnings to the user’s account or making payment, whichever is earlier.
3. TDS on Cumulative Winnings
TDS will be deducted if cumulative winnings from a game or contest in a financial year exceed ₹10,000.
LDL is responsible for tracking winnings and deducting TDS on a cumulative basis for all transactions in a financial year.
4. Responsibility of LDL
LDL is liable to deduct and deposit TDS with the Income Tax Department on behalf of the users.
Form 26Q: LDL will file quarterly returns in Form 26Q for all TDS deductions.
Form 16A: LDL will issue a TDS certificate in Form 16A to users whose TDS has been deducted, which can be used for tax filings.
5. PAN Requirement
Users must provide their PAN (Permanent Account Number) to LDL.
If the user does not provide a PAN, the TDS will be deducted at a higher rate of 30% or the applicable rate under the Income Tax Act.
6. Non-Residents
For non-resident users, TDS will be deducted under Section 195 of the Income Tax Act, and the rate may vary based on the Double Tax Avoidance Agreement (DTAA), if applicable.
7. Illustration
If a user wins ₹15,000 in a contest, TDS will be deducted on ₹5,000 (₹15,000 - ₹10,000) at the rate of 30%. The TDS amount will be ₹1,500.
Net winnings credited to the user will be ₹15,000 - ₹1,500 = ₹13,500.
8. TDS Refund and Filing of Returns
Users can claim a refund of TDS while filing their Income Tax Returns if their total income is below the taxable limit or if they are eligible for any tax deductions.
The deducted TDS will reflect in the user's Form 26AS on the income tax portal.
9. Liability and Compliance
LDL will ensure strict compliance with all TDS provisions to avoid any penalties for non-compliance under the Income Tax Act.
Penalties: Failure to deduct or deposit TDS may result in penalties and interest as per the Income Tax Act, 1961.
10. Amendments to the Policy
This TDS policy is subject to amendments based on changes in Indian tax laws. LDL will notify users in case of any changes to the policy.