[To BE Published in the Gazette of INDIA, Extraordinary, Part II, section 3, Sub-section (ii)]
Notification No. 43/2016] [F.No. 370142/7/2016-TPL] / SO 1949(E) was published on 2 June 2016. Its subject is [To BE Published in the Gazette of INDIA, Extraordinary, Part II, section 3, Sub-section (ii)].
This amends the Income-tax Rules. What it changes is the Rules, not the Act — and a rule can never take away what the section gives.
The Income-tax (14th Amendment) Rules, 2016, made under section 295 read with sub-section (2) of section 14A of the Income-tax Act, 1961, substitute sub-rule (2) of rule 8D of the Income-tax Rules, 1962 and omit sub-rule (3). Under the substituted sub-rule (2), the expenditure in relation to income which does not form part of the total income is the aggregate of the expenditure directly relating to such income and 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 the income from which does not or shall not form part of the total income. A proviso caps the aggregate of the two amounts at the total expenditure claimed by the assessee.
[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (ii)]
GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
CENTRAL BOARD OF DIRECT TAXESNOTIFICATION
New Delhi, the 02nd June, 2016
S.O. 1949(E)- In exercise of the powers conferred by section 295 read with subsection (2) of section 14A of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-
1. (1) These rules may be called the Income–tax (14th Amendment) Rules, 2016.
(2) They shall come into force on the date of their publication in the Official Gazette.2. In the Income-tax Rules 1962, in rule 8D,-
(I) for sub-rule (2), the following sub-rule shall be substituted, namely:-
"(2) The expenditure in relation to income which does not form part of the total income shall be the aggregate of following amounts, namely:—
(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:
Provided that the amount referred to in clause (i) and clause (ii) shall not exceed the total expenditure claimed by the assessee.";
(II) sub-rule (3) shall be omitted.[Notification No. 43/2016] [F.No. 370142/7/2016-TPL]
(Dr. T.S. Mapwal)
Under Secretary to Government of IndiaNote:- The principal rules were published vide Notification S.O. 969 (E), dated 26th March, 1962 and last amended by Income-tax (13th Amendment) Rules, 2016 vide Notification S.O.1923(E), dated 31.05.2016.
| Rule of the 1962 Rules | Now, in the 2026 Rules |
|---|---|
| Rule 8D | rule 14 |
the date of publication in the Official Gazette.
In the disallowance computed under section 14A in the return of income, in the tax audit reporting of that disallowance, and in the assessment where the Assessing Officer applies rule 8D.
If the monthly averages of the opening and closing balances of the exempt-income-yielding investments give an annual average of Rs. 100 lakh, the second limb is Rs. 1 lakh, to which the directly related expenditure is added; if the assessee's total expenditure claimed is less than that aggregate, the proviso limits the disallowance to the total expenditure claimed.
Rules it names. Rule 8D of the Income-tax Rules, 1962. The 1962 Rules were replaced by the Income-tax Rules, 2026, which renumbered nearly everything: a rule number quoted here almost never means the same rule today.
Source: the Income Tax Department’s own published text — its page for this instrument.