{"id":25924,"date":"2019-10-24T11:00:39","date_gmt":"2019-10-24T05:30:39","guid":{"rendered":"https:\/\/enterslice.com\/learning\/?p=25924"},"modified":"2019-10-23T18:13:56","modified_gmt":"2019-10-23T12:43:56","slug":"provisions-and-exemptions-under-section-14a","status":"publish","type":"post","link":"https:\/\/enterslice.com\/learning\/provisions-and-exemptions-under-section-14a\/","title":{"rendered":"Read About the Provisions and Exemptions Under Section 14A"},"content":{"rendered":"

Tax is the primary source of revenue for Government in India, and thus, various forms of income are taxable under the purview of the Income Tax Act<\/strong>[1]<\/a><\/sup>. However, individual incomes are exempted from taxability and don’t fall within the scope of the tax laws of India. Incomes such as agricultural income, tax-free interest, eligible incomes of charitable institutions, etc. are exempted from tax, and thus assessee needs not to pay any tax on such income. <\/p>\n\n\n\n

However, in a few cases, assessee incurred certain expenditures to\nearn income,\nwhich is tax-free income, i.e., exempted income. For Instance, to finance the\ninvestment in tax-free bonds, the taxpayer has taken the loan and is paying the\ninterest on such a loan.<\/p>\n\n\n\n

So, the question arises whether the taxpayer can claim the expenses incurred to earn the exempted income. <\/em>There is a contradictory view on this debate. The taxpayer contended that such expenses incurred to earn the exempted income should be allowed as a deduction to arrive at taxable income. On the contrary, Income Tax Department holds an entirely different view stating that whole income is already exempted from tax liability, and those expenses shall not be allowed as they will reduce the total tax liability on non-exempted incomes.<\/p>\n\n\n\n

Therefore, section 14A<\/strong> was introduced with effect from 2001, bringing clarity on the intentions of the legislature concerning the expenses made to earn exempt income, which is discussed in brief henceforth.<\/p>\n\n\n\n

Section 14A- An\nOverview<\/strong><\/h2>\n\n\n\n

As per the Section 14A of\nthe Income Tax Act, 1961 expenditure incurred by the\ntaxpayer for earning the income which is not included in the taxable income or\nsuch incomes are exempted from the tax implications should not be considered or\ntaken into account while computing the total income of the taxpayer to levy tax\nthereon.<\/p>\n\n\n\n

The main motive behind the insertion of this section is to ensure\nthat the taxpayer doesn’t get the double benefits in case of composition\ntransactions. <\/p>\n\n\n\n

Applicability of\nSection 14A<\/strong><\/h2>\n\n\n\n

Section 14A applies in the following cases:<\/em><\/p>\n\n\n\n