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CMA Intermediate · Direct and Indirect Taxation · Profits and Gains of Business or Profession

Under the Income-tax Act, 2025, in computing income from winnings from lotteries, crossword puzzles, card games and gambling or betting, which statement is correct?

No deduction for any expenditure or allowance related to the income is allowed. Section 94(4) bars all such deductions when computing winnings from lotteries, crossword puzzles, races, card games and other games or gambling and betting, so even expenses incurred to earn the winnings cannot be claimed.

  1. AOnly expenditure incurred wholly and exclusively for earning such winnings is deductible
  2. BNo deduction for any expenditure or allowance related to such income is allowedCorrect
  3. CA deduction up to 30% of the winnings is allowed as a standard deduction
  4. DExpenditure is deductible only if paid through banking channels

Explanation

Section 94(4) states that in computing income from lotteries, crossword puzzles, races, card games and other games, gambling or betting, no deduction for any expenditure or allowance related to such income is allowed. The other options describe deductions that the Act does not permit for such winnings.

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