Income Tax—TDS—Winnings on Stake Money

In regard to winnings from horse racing issue arises whether TDS is to be deducted both on betting money and prize money for participation of a horse in a race.

In this context the following is noticeable:-

1] That section 2[24][ix] of the IT Act defines income to include any winnings from lotteries……races including horse races……..and other games of any sort or ……..whatsoever.

2] That section 194B [on winnings from lottery …..or game of any sort] and 194BB [on winnings from horse races by way of wagering or betting in any race course] are sections in which TDS is deductible @ 30% on both accounts on amount exceeding Rs.10000.

3] Stake money refers to prize money received on a racehorse by the owner of such horse on account of the horse winning any prize. In fact stake money is typically paid to assist the owners of horses to meet the expenses incurred by them towards the purchase and maintenance of horses.

4] As such on stake money, it was held by decision of Bangalore Turf Club v Union of India [2015] 228 Taxman 234 [Karnataka High Court] that tax is not deductible. Department interpreted this amount under section 194B as “……winning from other game of any sort”. High Court relied on CBDT Circular No. 240, dated 17-5-1978 which read as follows: The provisions for deduction of tax at source will, however, not apply to income by way of stake money.

5] The confusion arose in view of the Circular issued in 1978 and the amendment in section 194B to include …..”or card game and other game of any other sort was made in 2001″. The revenue contended that on account of the words ‘or card game and other similar game’ introduced by the Finance Act, 2001 in section 194B of the Act, the Turf Clubs were liable to deduct TDS on ‘stake money’ paid to the horse owners. This confusion has been cleared by the High Court’s decision that stake money does not fall in sections 194B and 194BB of the I.T.Act and as such is not liable for TDS.

6] On betting money won there is no doubt that TDS is required to be deducted.

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