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

Mehta Traders earned Rs. 5,00,000 of income that does not form part of total income and incurred Rs. 40,000 of expenditure in relation to it. Under section 14 of the Income-tax Act, 2025, how is this expenditure treated in computing total income?

The Rs. 40,000 is not deductible. Section 14(1) of the Income-tax Act, 2025 disallows any expenditure incurred in relation to income that does not form part of total income, overriding other provisions of the Act, so it cannot reduce taxable income.

  1. AAllowed as a deduction against the taxable business income
  2. BAllowed as a deduction only if the exempt income is received in the same tax year
  3. CAllowed to the extent of 50% of the amount incurred
  4. DNot allowed as a deduction in computing total incomeCorrect

Explanation

Section 14(1) says that, irrespective of anything contrary in the Act, no deduction is allowed for expenditure incurred in relation to income not forming part of total income. There is no 50% relief or same-year condition. Section 14(3) in fact applies even if the income has not accrued in that year.

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