Hi! I wanted to make the game for this gamejam and asking that horror games is allowed?

If it meets ESRB-Teen then it should be fine. https://en.wikipedia.org/wiki/Entertainment_Software_Rating_Board#Ratings In general, if it's relatively tame and isn't trying to "push the boundary" it's probably ok.

For more discussion on the topic see:

https://github.com/gbdev/gbcompo21/issues/9