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

Mr. Rao earns an income that does not form part of total income under the Income-tax Act, 2025. He incurred expenditure relating to it in a tax year, though the income itself has not accrued, arisen or been received in that year. Which statement is correct under Section 14?

No deduction is allowed. Section 14(1) disallows expenditure relating to income that does not form part of total income, and Section 14(3) expressly applies this even when the income has not accrued, arisen or been received during that tax year.

  1. AThe expenditure is allowed because the income has not yet accrued
  2. BThe expenditure is allowed only if the Assessing Officer is satisfied about its correctness
  3. CThe expenditure is allowed in the year the income is eventually received
  4. DNo deduction is allowed, as Section 14 applies even where such income has not accrued, arisen or been received in that yearCorrect

Explanation

Section 14(1) bars deduction of expenditure relating 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 absence of accrual does not rescue the deduction.

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