FCS Deepak Pratap Singh
Quick Summary
Every person whose total income of the previous year exceeds the maximum amount, which is not chargeable to income tax, is an assessee and chargeable to income tax in India at the rate or rates as may be prescribed in Finance Act and Income Tax for the relevant assessment year. We know that in I
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FAQ :
Section 14A of the Indian Income Tax Act, 1961, states that any expenditure incurred by an assessee in relation to income which does not form part of the total income under this Act shall not be allowed as a deduction.
Rule 8D of the Income Tax Rules, 1962, outlines the method for determining the amount of expenditure incurred in relation to income that does not form part of the total income, specifically for the purposes of Section 14A.
Rule 8D was amended on 2 June 2016, providing a revised method for allocating expenditure to exempt income.
Yes, according to CBDT Circular No. 5/2014, Rule 8D read with Section 14A can be invoked for disallowance of expenditure even if the taxpayer has not earned any exempt income in a particular year.
The disallowance of expenditure under Section 14A read with Rule 8D is a highly debated issue, with many judicial decisions available. Assessing Officers often disallow genuine expenditure, but they should prove a nexus between the expenditure and the exempt income.
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