Chapter IV - Computation of Total Income
Section 94
Section 94: amounts not deductible against income from other sources
Section 94 lists deductions that are specifically disallowed while computing income from other sources, overriding the general deduction rules in Section 93. It bars personal expenses, certain payments made outside India without tax deduction at source, and any expenditure against lottery, gambling or betting winnings (with a carve-out for people who own and maintain race horses).
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Need advice on Section 94?
This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Irrespective of anything contained in section 93, the following amounts shall not be deductible in computing the income of any assessee chargeable under the head “Income from other sources”:— (a) any personal expenses of the assessee; or (b) any interest chargeable under this Act, payable outside India, on which tax has not been paid or deducted under Chapter XIX-B; or (c) any payment chargeable under the head “Salaries”, if it is payable outside India, unless tax has been paid or deducted under Chapter XIX-B.
(2) The provisions of sections 29, 35(b)(i), and 36 shall apply in computing the income chargeable under the head “Income from other sources” as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.
(3) For an assessee, being a foreign company, the provisions of section 59 shall apply in computing the income chargeable under the head “Income from other sources”, as they apply in computing the income chargeable under the head “Profits and gains of business or profession”.
(4) In computing the 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 such income shall be allowed under this Act.
(5) 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.
(6) For the purposes of this section, the expression “horse race” means a horse race upon which wagering or betting may be lawfully made.
Introduction
Section 94 blocks specified expenses and allowances in computing other-sources income. Its wagering and lottery rules are particularly strict, while the section also imports other disallowance provisions from the business-income chapter.
Key takeaways
Other-sources exclusions
Personal expenses and specified overseas interest or salary payments without required tax payment or withholding cannot be deducted from income under other sources.
Dividend and winnings
The Finance Act, 2026 wording bars deductions against specified dividend and mutual-fund-unit income; spending related to lottery, gambling and similar winnings is also generally disallowed.
What cannot be deducted
Irrespective of Section 93, the following are not deductible in computing income from other sources: personal expenses of the assessee; interest chargeable under the Act that is payable outside India, if tax on it has not been paid or deducted under Chapter XIX-B; and any payment chargeable under the head "Salaries" that is payable outside India, unless tax on it has been paid or deducted under Chapter XIX-B.
Other provisions that apply here too
Sections 29, 35(b)(i), and 36 (which govern certain business-income deductions) also apply, with necessary adaptation, when computing income from other sources. For a foreign company, Section 59 applies in the same way it applies to business income computation.
No deduction against lottery, gambling and betting winnings
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 the Act.
This restriction does not apply to an assessee who owns and maintains horses for running in horse races, in respect of income from that horse-owning and maintaining activity.
What counts as a "horse race"
For this section, "horse race" means a horse race on which wagering or betting may lawfully be made.
Step-by-step flow for applying Section 94
- 1
Is the income chargeable under "Income from other sources"?
- No: Section 94 does not apply.
- Yes: Go to the next step.
- 2
Is it winnings from lotteries, crossword puzzles, races, card games or other games, gambling or betting?
- Yes: No expenditure or allowance is deductible (Section 94(4)), unless the income is a horse owner's income from owning and maintaining race horses (Section 94(5)).
- No: Go to the next step.
- 3
Is the claim a personal expense, interest payable outside India without tax paid or deducted under Chapter XIX-B, or a salary payment outside India without such tax?
- Yes: Not deductible under Section 94(1), irrespective of Section 93.
- No: Go to the next step.
- 4
Apply the imported business-head provisions
Sections 29, 35(b)(i) and 36 apply to this head as they do to business income (Section 94(2)); for a foreign company, Section 59 also applies (Section 94(3)).
Practical checklist
Do
- Separate each other-sources receipt and test its dedicated deduction or disallowance rule.
- Check the imported disallowance provisions before finalising the tax computation.
Avoid
- Do not net betting or lottery winnings against related expenditure where the section prohibits it.
- Do not assume a cost is deductible merely because it was actually incurred.
Illustrative example
Worked example: lottery winnings and interest
Hypothetical facts (illustration only, not a real taxpayer): Ms. Fernandes wins ₹5,00,000 in a lottery after buying tickets costing ₹3,000. She also earns interest that is taxed under "Income from other sources" on funds partly borrowed from a non-resident relative; interest of ₹50,000 payable to that relative was paid without deducting tax under Chapter XIX-B.
Lottery winnings
Under Section 94(4), the ₹3,000 ticket cost is not deductible, so ₹5,00,000 is the income from the winnings.
Interest payable outside India
The ₹50,000 is interest payable outside India on which tax was not paid or deducted under Chapter XIX-B, so Section 94(1)(b) bars its deduction.
Personal expenses
Any personal expenses are excluded under Section 94(1)(a).
Outcome
- Lottery income = ₹5,00,000 with no deduction.
- The ₹50,000 interest cannot be claimed against her other-sources income while the Chapter XIX-B condition is unmet.
Glossary
- Disallowance
- A rule preventing an expense from reducing taxable income despite its payment.
- Horse race
- A term separately defined here for the section's betting-related rules.
Frequently asked questions
Can I deduct expenses incurred to win a lottery?
No - Section 94(4) disallows any deduction for expenditure or allowance related to lottery, gambling, betting, or similar winnings.
Is there an exception to the no-deduction rule for gambling winnings?
Yes - it does not apply to an assessee who owns and maintains horses for running in horse races, for income from that specific activity.
Can personal expenses be deducted against income from other sources?
No - Section 94(1)(a) specifically disallows personal expenses of the assessee.
Need help applying this provision to your situation?
Get help correctly reporting other-source income and deductionsLast updated 10 October 2026