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CS Executive · Tax Laws and Practice · Income from Other Sources

Mr. Karan Singh owns racehorses and maintains them for running in horse races. His income from the activity of owning and maintaining those horses is computed under the Income-tax Act, 2025. Which statement is correct?

The bar on deducting expenditure against race winnings does not apply to the owner's income from owning and maintaining horses kept for races. Section 94(5) of the Income-tax Act, 2025 carves out this activity, so maintenance costs may be considered in computing that income.

  1. AThe bar on deducting expenditure against winnings from races does not apply to this owner's income from owning and maintaining horsesCorrect
  2. BNo expenditure on maintaining the horses can ever be deducted
  3. COnly personal expenses of the owner are deductible
  4. DThe race must be an illegal one for the owner to claim a deduction

Explanation

Section 94(5) states that the denial of deduction in section 94(4) does not apply to an owner of horses maintained for running in horse races, for the activity of owning and maintaining such horses. So the owner can claim expenses for that activity. The claim that no maintenance expenditure is ever deductible is wrong for this reason.

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