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

Mehta Trading Co. earns Rs 4,00,000 of income that does not form part of total income and incurs Rs 30,000 of expenditure relating to it in a tax year. The income has not yet accrued, arisen or been received in that year. Under Section 14 of the Income-tax Act, 2025, what is the position on the Rs 30,000?

No deduction is allowed for the Rs 30,000. Section 14(1) disallows expenditure relating to income outside total income, and Section 14(3) applies this even where the income has not accrued, arisen or been received during that tax year, so non-receipt gives no relief.

  1. ANo deduction is allowed, because Section 14(3) applies even though the income has not accrued, arisen or been received in that yearCorrect
  2. BIt is allowed because the income was not received in that year
  3. CIt is allowed only if the Assessing Officer is satisfied with the accounts
  4. DIt is allowed to the extent of 50% of the expenditure

Explanation

Section 14(1) bars deduction of expenditure incurred in relation to income not forming part of total income. Section 14(3) extends this to cases where the income has not accrued, arisen or been received in that tax year. So the timing of receipt does not rescue the claim, and there is no 50% rule.

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