Section 94 — Amounts not deductible. Successor to s.58 of the 1961 Act.
Section 94 is in Chapter IV — Computation of Total Income, which runs from section 13 to section 95.
Sub-section (1) overrides section 93 and lists three amounts that shall not be deductible in computing income chargeable under the head "Income from other sources": any personal expenses of the assessee under clause (a); any interest chargeable under the Act and payable outside India on which tax has not been paid or deducted under Chapter XIX-B under clause (b); and any payment chargeable under the head "Salaries" that is payable outside India, unless tax has been paid or deducted under Chapter XIX-B, under clause (c).
Sub-section (2) imports sections 29, 35(b)(i) and 36 into this head, so that they apply in computing income from other sources as they apply in computing income under the head "Profits and gains of business or profession". Sub-section (3) does the same with section 59 for an assessee that is a foreign company.
Sub-section (4) is a separate and absolute bar: in computing income from winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort, or from gambling or betting of any form or nature, no deduction for any expenditure or allowance related to that income is allowed under any provision of the Act. Sub-section (5) takes out of that bar an assessee who owns horses maintained for running in horse races, in computing income from the activity of owning and maintaining such horses. Sub-section (6) defines "horse race" as a horse race upon which wagering or betting may be lawfully made.
Income from other sources is the residual head, so without a list of exclusions the general allowance provision in section 93 would let in personal spending and payments made abroad without tax. Clauses (b) and (c) make deduction the reward for compliance with Chapter XIX-B. Sub-section (4) addresses a different mischief: winnings are taxed gross because the cost of losing bets is not a cost of earning the winning one, and sub-section (5) recognises that owning and maintaining race horses is an activity with real running costs rather than a wager.
Clauses (b) and (c) are curable: the words are "on which tax has not been paid or deducted", so deduction follows compliance with Chapter XIX-B rather than being lost for ever by the character of the payment. Sub-section (4) is not confined to this head and not confined to this section — it says no deduction is allowed under this Act for expenditure or allowance related to winnings income, so betting losses, entry fees and related costs cannot be netted off anywhere. Sub-section (5) is a narrow relief and is drafted by reference to the activity, not the person: it is the income from the activity of owning and maintaining race horses that escapes sub-section (4), not the owner's winnings from betting on races. Sub-sections (2) and (3) mean that the business-head provisions they name travel with the income into this head, so their conditions travel too.
An individual wins Rs 10 lakh on a card game during the year and has spent Rs 2 lakh on entry fees and losing stakes. Sub-section (4) allows nothing against the Rs 10 lakh, so the whole amount is taxed. Separately, the same individual owns horses maintained for running in races and incurs training and stabling costs on that activity; sub-section (5) takes those costs outside the bar, so the income from owning and maintaining the horses is computed after them.
In a scrutiny assessment of income under the head "Income from other sources", most often where interest or salary paid abroad has been claimed without deduction of tax under Chapter XIX-B, or where expenses have been netted against winnings reported by a payer. The gross taxation of winnings under sub-section (4) is what a reader usually encounters as a mismatch between a payer's reported figure and the amount they thought was taxable.
any interest chargeable under this Act, payable outside India, on which tax has not been paid or deducted under Chapter XIX-B
no deduction for any expenditure or allowance related to such income shall be allowed under this Act
Sub-section (4) shall not apply in computing the income of an assessee, being the owner of horses maintained for running in horse races, from the activity of owning and maintaining such horses
See the full 1961 to 2025 concordance.
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