May 2008
Method prescribed for determining the amount of expenditure relating to exempt income : Income-tax (Fifth Amendment) Rules, 2008, dated 24-3-2008.
fiogf49gjkf0d
New Page 1
23 Method prescribed for determining the
amount of expenditure relating to exempt income : Income-tax (Fifth Amendment)
Rules, 2008, dated 24-3-2008.
Pursuant to an amendment in S. 14A of the Act, the Board has
prescribed a method to determine an amount of expenditure which can be
attributed to exempt income in cases when either the AO is not satisfied with
the correctness of the claim of the assessee for such expenditure or when the assessee has
claimed that no expenditure is incurred in relation to exempt income. As per the
said method the expenditure in relation to exempt income shall be aggregate of
the following 3 amounts :
- Expenses directly relating to exempt income
- Interest not directly relating to exempt income * Average of the amount of
investment, on the first and the last days of the year, which generates exempt
income/average of total assets as appearing on the balance sheet on the first
day and the last day of the year.
- One-half percent of the average value of investment, on the first and the last
days of the year, which generates exempt income.
For the purpose of this Rule, total assets shall mean, total
assets as appearing in the balance sheet excluding the increase on account of
revaluation of assets but including the decrease on account of revaluation of
assets.
