Section 194BB - Income Tax

Section 194BB is a provision in the Income Tax legislation which provides a deduction on any income generated from winning a horse race. In a horse race, the winner of the race, i.e. the jockeys, trainers and owners will win monetary rewards. Tax for such winnings will be deducted from the concerned concern person before being disbursed. In this article, we briefly discuss Section 194BB of the Act, which relates to winnings earned from a horse race.

Section 194B of Income-tax Act at a Glance

Section 194BB was inserted after Section 194B. As per Section 194B, any person receiving any income by way of winning from lottery or crossword puzzle or card game and other game for an amount or more than Rs.10000 will have to pay Income Tax and TDS must be deducted before releasing the payment from the concerned person. Under Section 194B, in case of winnings which are wholly in kind or partly in cash and partly in kind, if the winning part in cash is not sufficient to meet the liability of deduction of tax under this section in respect of the whole of the winnings, the person responsible for paying will have to ensure that tax has been paid to the Government before the amount of the winnings is released to the deductee.

TDS under Section 194BB

Below listed persons are responsible to deduct and pay tax under this Section 194BB on any winnings from a racehorse.

A bookmaker or Turf accountant
A person who has a Government-issued licence for horse racing
A person who having a Government-issued licence for wagering or betting any horse race.

Threshold Limit for TDS under Section 194BB

Under the provision of Section 194BB of the income tax act, TDS will be deducted if the prize for winning horse races exceeds Rs.10000. The threshold limit is varying for every financial year. Some examples of the limits are tabulated in the following table:

Sl.No	Assessment Year	Limit
1	Upto June 2010	Rs.2500
2	After July 2010	Rs.5000
3	From 2018 to 2019	Rs.10000
4	From 2019 to 2020	Rs.10000

If a payment of less than Rs.10000 is made, the tax will not be deducted.

Rate of TDS for Winnings from Horse Race

Rate of TDS on payments of winnings from horse race under Section 194BB of Income Tax Act, 1961 is 30% plus surcharges. Income Tax will be deducted at the time of making payment. If the prize is paid in instalments, the tax deduction will be made at the time of each instalment. For example, let us assume that Usha’s horse won a race, and the bet amount of the race was Rs.30000. Usha will be credited with an amount less than 30000 i.e, under the provision of Section 194BB 30% of 30000 will be deducted as tax & remaining amount will be credited to the person’s account. Also read: Lottery Tax in India

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