An Indian permanent establishment outside the banking and insurance exceptions borrows ₹900 crore for a full tax year from a non-resident associated enterprise at 10% interest. Its EBITDA is ₹150…

Section 177(4) of the Income-tax Act, 2025 treats as excess interest the lower of interest above 30% of EBITDA and the interest paid to associated enterprises: interest is ₹90 crore and 30% of EBITDA is ₹45 crore, so ₹45 crore is disallowed and ₹45 crore allowed. The disallowed amount can be carried forward for up to eight tax years; ₹27 crore wrongly applies 30% to the interest instead of EBITDA.