Royal Western India Turf Club in Mumbai Issues Notices to Patrons Asking Them to Comply With New TDS Requirements

The government’s announcement that new TDS rules introduced in the Union Budget 2023 will be applicable from April 1, 2023, instead of July 1, 2023, has sent the country’s racing centers scurrying to implement the new norms. The different horse racing organizations have begun to send notices to their stakeholders, informing them about the new TDS requirements on winnings from horse racing.

As part of the TDS changes, all racing clubs will deduct TDS on aggregate winnings that are ₹10,000 or more in a single financial year. Earlier, TDS was deducted when anyone won ₹10,000 or more on a single bet, but smaller wins were not added up and brought into the taxation window. The race clubs will also have to keep the KYC of punters on file, and only PAN Card holders can claim a refund of the TDS deducted.

In a notice dated March 19, 2023, the country’s leading race club, the Royal Western India Turf Club in Mumbai, asked its stakeholders to provide the required KYC details to help them claim the TDS benefit, which will be reflected in the ITR-26AS.

The change in the TDS rules for horse racing is a big negative for regular race-goers. Bettors who used to small-bet on horse racing will feel the pinch the most. While there is no escaping the 30% TDS of winnings of the ₹10,000 threshold, not only will winnings of ₹10,000 and more be taken into account, but the smaller winnings will also get added up from the new financial year.

What the Notice Says

On March 19, 2023, the Royal Western India Turf Club issued a notice to its patrons, stating that the Finance Bill 2022 has proposed amending Section 194BB of the Income Tax Act 1961, according to which the TDS threshold on winnings from horse racing will be ₹10,000 in aggregate in a financial year.

The notice read: “In order to ensure proper compliance and extend the benefit as per amended IT rule, patrons are required to register with the club by filling out the KYC and submitting details. After registration, each patron will be provided with a Tote Card, which will be required to be presented at the time of claiming your payouts or purchasing a Tote Ticket on Totalizators Window. This will record all dividends paid to a patron in a financial year to ensure the patron gets the TDS benefit in a financial year. Details of TDS deducted will be reflected in ITR 26ASS, and a TDS Certificate will be provided at the end of every quarter.”

The Turf Club emphasized that all patrons must register to avail of the benefit. Otherwise, the TDS will be deducted for every payout transaction at 30%, and the same will be submitted to Income Tax under the No-PAN category. If this happens, such patrons will not be able to claim refunds for the TDS deducted in the absence of a PAN number.

While patrons who register only with Aadhar Card and not with a PAN Card will be able to avail of the benefit of ₹10,000 per year, a refund on any TDS deducted beyond that will not be claimable.

The club also detailed that the KYC registration will start on March 20 at the Mumbai and Pune Race Courses.

TDS on Horse Racing Decoded

The tradition of horse racing has been kept alive by the handful of horse racing turf clubs scattered around the country. The punters are already paying a 28% GST on the commission of the money wagered, irrespective of the wins, along with the club commission, the latter varying as per the betting pools.

As per section 115BB, winnings from lotteries, crossword puzzles, races including horse races, card games, and other games are subject to TDS at 30%, effectively coming to 31.2%, counting surcharge and cess.

Through the Union Budget 2023, the central government introduced two new sections, Section 115BBJ and Section 194BA, to the Income Tax Act to distinguish winnings from online gaming (including poker, rummy, and fantasy sports) from other betting and gambling activities.

The proposed amendments will be implemented from April 1, 2023. According to the new TDS rules, bettors must pay 30% TDS on every rupee they win, beyond the annual exemption of ₹10,000. While earlier, TDS was to be deducted on any winning of ₹10,000 or more, now even their smaller, and hence the aggregate winnings for the year will be recorded via their registration and KYC mandate.

Earlier, there were instances when people avoided the tax deduction by splitting winnings into transactions under ₹10,000. While the government hopes to bring more bettors under the taxation with the amendments, changes in TDS rules for horse racing make the sport less attractive for small punters who will now have to bear the TDS load even for smaller ones’ winnings that will get aggregated for a financial year.

By way of the new TDS changes, the government has also removed the minimum threshold of ₹10,000 on TDS from online winnings and the mandatory tax deduction of winnings in player accounts at the end of the financial year. These changes will be effected from April 1, 2023.