Section 74A of Income Tax Act 1961: Loss from Owning and Maintaining Race Horses

Section 74A governed the set off and carry forward of loss from the activity of owning and maintaining race horses under the Income-tax Act, 1961. From 1 April 2026, the Income-tax Act, 2025 applies to Tax Year 2026-27 onward, and the corresponding rule is contained in Section 115.

Updated: 28 September 2026

Important legal update: The Income-tax Act, 1961 has been repealed with effect from 1 April 2026. Section 74A remains relevant to periods governed by the repealed Act and to transition of eligible brought-forward losses. For Tax Year 2026-27 and later, see Section 115 of the Income-tax Act, 2025.

Section 74A at a glance

The operative provision concerns loss from owning and maintaining race horses.
Such loss cannot be set off against income from another source or activity.
Eligible unabsorbed loss may be carried forward and set off against income from the same activity.
The maximum carry-forward period is four assessment years immediately following the year in which the loss was first computed.
For the new Income-tax Act, 2025, the corresponding provision is Section 115.

What did Section 74A provide?

The heading of Section 74A refers to losses from certain specified sources falling under the head "Income from other sources". In the version applicable immediately before repeal of the Income-tax Act, 1961, sub-sections (1) and (2) stood omitted. The operative sub-section (3) dealt with an assessee who owned horses maintained for running in horse races.

The practical rule was ring-fencing: a loss from owning and maintaining race horses could not be adjusted against income from another source. Subject to the other provisions governing losses, the loss could be carried forward and used against income from the same race-horse activity.

Section 74A(3): set off and carry forward rule

Current effect of the repealed provision: Where an assessee incurred a loss in the activity of owning and maintaining race horses, that loss was not permitted to be set off against income from a source other than that activity for the same assessment year.

The eligible loss could be carried forward to the following assessment year and set off against income from owning and maintaining race horses, provided the activity continued in the relevant previous year.

If the loss could not be fully absorbed, the balance could continue to be carried forward, but not beyond four assessment years immediately succeeding the assessment year for which the loss was first computed.

Definitions under Section 74A

Loss from owning and maintaining race horsesIf there was no stake money, the loss broadly represented revenue expenditure incurred wholly and exclusively for maintaining race horses. Where stake money was earned, the loss was the shortfall of that income against such eligible expenditure. Capital expenditure was excluded.

Horse raceA horse race on which wagering or betting may lawfully be made.

Income by way of stake moneyThe gross prize money received by the owner because a race horse won or obtained a qualifying position in a horse race.

Race horsesFor the purpose of the provision, the rule concerned horses owned and maintained by the assessee for running in horse races.

Four-year limit for carrying forward the loss

Section 74A imposed a specific time limit. An unabsorbed eligible loss could not be carried forward for more than four assessment years immediately succeeding the assessment year in which the loss was first computed. The loss also remained restricted to set off against income from the race-horse activity, rather than becoming available against unrelated income.

Law from 1 April 2026: Section 115 of the Income-tax Act, 2025

For Tax Year 2026-27 onward, Section 115 of the Income-tax Act, 2025 contains the corresponding rule for the "specified activity", defined as owning and maintaining race horses. It continues the core treatment: the loss is set off only against income from the specified activity, an unabsorbed amount may be carried forward, and the carry-forward period is limited to four tax years.

The 2025 Act also contains transition and savings provisions. Section 536 preserves the treatment of qualifying losses arising under Section 74A of the repealed 1961 Act, subject to the statutory conditions. Therefore, the year to which the loss relates is important when identifying the applicable Act and provision.

Return filing condition: Carry forward of specified losses is also subject to the applicable return-of-loss requirements. Under the Income-tax Act, 2025, Section 121 retains the timely return condition for loss from the activity of owning and maintaining race horses.

Official references

For authoritative text and transition guidance, refer to the Income Tax Department resources: Income Tax Department - Acts, Income-tax Act, 2025 resources, and official guidance on the scope and commencement of the new Act.

This article is a general legal and tax reference. The applicable provision depends on the relevant assessment year or tax year, facts, filing compliance, and transition rules.