Expenditure related to exempt income is not deductible, and prescribed disallowance methods apply when claims are not accepted. Expenditure incurred in relation to income not includible in total income is not allowable as a deduction. The Assessing Officer may determine disallowable expenditure where the assessee's claim is not accepted, using the prescribed method covering direct expenditure and a specified percentage of relevant investments, subject to the total expenditure claimed. The provision applies even where the exempt income has not accrued, arisen, or been received during the tax year.