A general doubt

of Income Tax Act?

Hi Kesha,

I suppose you are talking about section 14a of the Income Tax Act.
section 14a is to be read with rule 8D and provides for the disallowance of expenses relating to the exempted incomes such as say dividend.

the disallowance is made on a proportionate basis i.e.
say your total income is Rs. 100 and the dividend earned is Rs. 20 i.e 20% of the income

and the total expenses is Rs 50. then they will assume that 20% of the total expenses i.e. Rs. 10 will be disallowed and will be assumed to be for earning dividend.

thanks aniket for explaining in simple words I had never read this section before........