Section 194BB of the Income Tax Act, 1961, mandates Tax Deducted at Source (TDS) on winnings from horse races, ensuring tax compliance for betting and wagering activities. Below is a detailed breakdown of its provisions:
1. Applicability of Section 194BB
- Covered Activities:
- Winnings from horse races(including betting, wagering, and bookmaking).
- Applies to licensed racecoursesand government-approved betting operators.
- Threshold for TDS:
- Single transaction exceeding ₹10,000(from April 1, 2025, replacing the earlier aggregate limit).
2. TDS Rate and Calculation
| PARAMETER | DETAILS |
| TDS Rate | Flat 30% (no surcharge or cess). |
| PAN Requirement | If PAN is not provided, the rate increases to 34.608% (including cess). |
| Non-Cash Prizes | TDS applies on the fair market value of prizes (e.g., cars, trophies). |
Example:
- Winnings: ₹15,000
- TDS (30%): ₹4,500
- Net Payout: ₹10,500
3. Who Deducts TDS?
- Bookmakers
- Licensed racecourse operators
- Government-approved betting agencies.
- Due Date: Deposit TDS by the 7th of the next month(or April 30 for March payments).
4. Key Changes (Effective April 2025)
- Single-Transaction Threshold: TDS now applies per transaction >₹10,000 (earlier: annual aggregate).
- Impact:
- Winners: Face TDS on every large win (no annual buffer).
- Deductors: Simplified compliance (no cumulative tracking).
5. Compliance & Penalties
- For Deductors:
- Late TDS: 1% interest/month(deduction delay) + 5% interest/month (deposit delay).
- Non-compliance: Penalty up to TDS amount + prosecution (3 months–7 years).
- For Winners:
- Report winnings in ITR(even if below ₹10,000).
- No deductions(e.g., Section 80C) allowed on such income.
6. Exemptions
- Non-residents: DTAA may apply for lower rates.
- Sub-₹10,000 transactions: No TDS (but still taxable).
Key Points
✅ Flat 30% TDS on winnings >₹10,000 per transaction (post-April 2025).
✅ PAN mandatory to avoid higher deduction (34.608%).
✅ No exemptions – Full amount taxable under “Income from Other Sources”.
✅ Legal status: Horse racing is a “game of skill” (exempt from gambling bans)
