Section 14A Disallows Deductions for Exempt Income-Related Expenditures; Rule 8D Outlines Calculation Method; Applies Retrospectively

Section 14A of the Income-tax Act, introduced by the Finance Act, 2001, disallows deductions for expenditures related to income exempt from tax under section 10. This applies retrospectively from April 1, 1962. Rule 8D specifies the calculation method for such expenditures, including direct expenses, interest, and a percentage of investment value. Section 14A applies only to exempt income under section 10, not to deductions under Chapter VI-A. Disallowance is applicable even if no exempt income is earned. Circulars clarify that assessments finalized before April 1, 2001, should not be reopened to apply section 14A.