CBDT Notification – CBDT specifies new method for disallowance of expenditure relating to exempt income

 Notification No. 43/2016 dt. 2nd June 2016

Recently, the Central Board of Direct Taxes (CBDT) has issued a Notification No.43/2016 amending Rule 8D of the Income-tax Rules, 1962 (the Rules). The Notification substituted Rule 8D(2) of the Rules. As per the amended rule, the disallowance of expenditure relating to exempt income shall be the aggregate of (i) the amount of expenditure directly relating to income which does not form part of total income and (ii) an amount equal to one per cent of the annual average of the monthly averages of the opening and closing balances of the value of investment, income from which does not or shall not form part of total income. The said disallowance shall not exceed the total expenditure claimed by the taxpayer.

Notification No. 43-2016