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CMA Intermediate · Direct and Indirect Taxation · Income which does not form part of Total Income

Under Section 14 of the Income-tax Act, 2025, what is the treatment of expenditure incurred by an assessee in relation to income that does not form part of total income, when computing total income?

No deduction is allowed. Section 14(1) of the Income-tax Act, 2025 overrides other provisions and disallows any expenditure incurred in relation to income that does not form part of total income when computing total income under the Chapter.

  1. ANo deduction is allowed for such expenditureCorrect
  2. BThe expenditure is allowed in full if it is incurred wholly for business
  3. CThe expenditure is allowed only up to 50% of the exempt income
  4. DThe expenditure is allowed only in the year in which the exempt income is received

Explanation

Section 14(1) says that, irrespective of anything to the contrary in the Act, no deduction is allowed for expenditure incurred in relation to income which does not form part of total income. The option allowing it in full for business purposes contradicts this overriding rule.

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