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13th June 2016

Comparison of Existing Rule 8D viz a viz Amended

Rule 8D is as under:-
CBDT NOTIFICATION
Particulars of Existing Rule Amended Rule
disallowance 8D 8D
CBDT issued Notification No. 43/2016 (F. No. Direct Disallowed Disallowed
370142/7/2016-TPL) dated 02nd June 2016 amending Expenditure in
relation to EI
Rule 8D of the Income Tax Rules, that provides for the
Interest Disallowed Clause omitted
methodology of calculating the quantum of expenses
Expenditure
relating to Income which do not form part of the total
indirectly
taxable income. In ordinary parlance, the same attributable to
relates to the computation of disallowance u/s. 14A EI
of the Income Tax Act, 1961. Amount of 0.5% 1%
disallowance
The existing sub-rule (2) and (3) of Rule 8D have been
Mode of Annual Annual average
replaced by new sub-rule (2). The new sub rule (2)
computation of average of of the monthly
provides as under:- Average opening & averages of
investments closing opening &
The expenditure in relation to income which does not balance of closing balance
form part of the total income shall be aggregate of: investment. of investment.

i. Expenditure directly related to exempt Restriction of No restriction Disallowance

income, and Disallowance restricted to
the total
Expenditure
ii. 1% of the annual average of the monthly
claimed by the
averages of the opening and closing assessee.
balances of the value of investment, income
from which does not or shall not form part of
Our Comments
total income.
 Relief to assessee as no disallowance in respect to
Amended Rule shall come into force on the date of •
general interest expense.
its publication in the Official Gazette, i.e. on 2nd  Full stop on widespread litigation with respect to
June 2016. cases where disallowance under the said rule
exceeded the total expenditure claimed by the
assessee.
 No clarification provided w.r.t. the issue where
the disallowance exceeded the exempt income or
where no exempt income is earned during the
year