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CS Executive · Tax Laws and Practice · Incomes which do not form part of Total Income

Arjun Pvt Ltd incurred expenditure in tax year 2026-27 in relation to an income that does not form part of total income under the Act, but that income has not accrued, arisen or been received in that tax year. Under section 14(3) of the Income-tax Act, 2025, what is the position?

Section 14(3) extends the disallowance to cases where expenditure is incurred in a tax year for income that does not form part of total income, even if that income has not accrued, arisen or been received in that year. The expenditure is therefore not deductible in that year.

  1. AThe expenditure is allowed in 2026-27 and disallowed when the income arises
  2. BSection 14 applies and the expenditure is not deductible even though the income has not arisen in that yearCorrect
  3. CSection 14 applies only in the year in which the exempt income is received
  4. DThe expenditure is carried forward to be set off against the exempt income

Explanation

Section 14(3) expressly applies the section where expenditure is incurred in a tax year in relation to exempt income, even though that income has not accrued, arisen or been received in that year. So the disallowance is not postponed. The year-of-receipt and carry-forward options contradict this.

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