No exempt Income Received or Receivable- No disallowance U/s. 14A

Section 14A of the Act provides that for the purposes of computing the total income under Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. Hence, what section 14A provides is that if there is any income which does not form part of the income under the Act, the expenditure which is incurred for earning the income is not an allowable deduction.

In other words if no exempt income was received or receivable during the relevant previous year under consideration , no disallowance of expenditure can be made u/s. 14A of the 1961 Act.

Income Tax Department issue circular (CBDT Circular no. 5/2014 dated 11.02.2014) to determine the amount of expenditure to be disallowed Under Rule 8D:

As per the Income-tax law as it stands today (post amendment in June 2016), expenditure incurred in relation to earning exempt income is the aggregate of following:

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