Tax on Horse Race Winnings in India

Horse racing is a well-established industry in India. Many like to bet on such events as a pastime or alternative income source. The Indian Contract Act, 1872 prohibits any kind of betting and gambling. But it contains a provision making an exemption for betting on horse-racing, making them permissible under the Contract Act. Thus, individuals who participate in this activity and gain profits need to pay tax on horse race winnings. 

Keep reading to know the applicable rates and more!

Tax Rate on Winnings from Horse Races

Income from horse races falls under the head “Income from Other Sources” and is taxed at a flat rate of 30% u/s 115BB of of the Income Tax Act. As per Section 194BB of the Income Tax Act, earnings from horse race winnings for a single transaction above Rs.10,000  will be applicable for Tax Deduction at Source (TDS) at a flat rate of 30%.

Let's take an example for better understanding. Suppose you win Rs.90,000 by betting on a horse race. Thus, before handing over the money to you, the bookie will deduct TDS. 

So, tax deductible in this regard will be:

30% of 90,000 = Rs.27,000

Therefore, you will receive:

Rs. 90,000 – Rs. 27,000 = Rs.63,000 

Here are the entities that have the legal right to deduct tax at source from your horse race winnings:

• Turf accountant 
• Bookmaker
• Government-issued license holder for betting or wagering in horse races  

Are there any Tax Deductions Available on Horse Race Winnings?

As per Income Tax laws, no deductions are available on your income from horse race winnings. Thus, tax benefits under Section 80C or 80D will not be eligible. 

Is Betting on Horse Races Legal in India?

Horse racing is a 200-year-old sport in India. In 1777, the country's first racecourse was established in Madras. Now, there are nine such racetracks under the governance of six racing authorities. 

As per the Indian Contract of 1872, any type of betting or gambling is illegal in India. But, an exception was made for wagering in horse races for bets above Rs.500 because the authorities consider horse racing a 'game of skill'.

People who place bets on such races need to have in-depth knowledge of the riders, their horses, their current form, the race track and much more. Additionally, there are various kinds of wagers, like straight bets, exotic bets, boxing bets, etc. 

Before an individual places a wager, he/she has to take note of all the factors mentioned above and make a decision. These aspects ruled out betting on horse races as a 'game of chance' and thus got the nod of legalisation from the Indian Government.    

Final Word

So, if you are involved in betting on horse races in India, it's important to understand both the tax implications on such activity. While horse racing is recognized as a "game of skill" and is exempt from the general ban on betting under the Indian Contract Act, 1872, any winnings from these bets are subject to a flat 30% tax. The Income Tax Act mandates that Tax Deduction at Source (TDS) be applied to winnings exceeding Rs.10,000 per a single transaction. Additionally, no deductions or tax benefits are available for horse race winnings.