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

Under section 14(2) of the Income-tax Act, 2025, when may the Assessing Officer determine the expenditure relating to exempt income by a prescribed method?

The Assessing Officer may apply the prescribed method only when, having regard to the accounts, he is not satisfied with the correctness of the expenditure claimed, or with the assessee's claim that no expenditure was incurred, in relation to income not forming part of total income.

  1. AWhenever the assessee earns any exempt income, even if the accounts are accepted as correct
  2. BOnly when the assessee has claimed the exempt income as taxable
  3. COnly when the exempt income exceeds the taxable income of the year
  4. DWhere, having regard to the accounts, he is not satisfied with the correctness of the claimed expenditure or with the claim that no expenditure was incurredCorrect

Explanation

Section 14(2) is triggered by the Assessing Officer's dissatisfaction, based on the accounts, with either the expenditure claim or the claim that no expenditure was incurred in relation to exempt income. Only then does he apply the prescribed method. The mere existence of exempt income is not enough.

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