Income Tax Act

Official PDF pages 26–30

SOURCE PDF PAGE 26
( b )   a non-fungible token or any other token of similar nature, by what -
ever name called;
( c )   any other digital asset, as the Central Government may, by notifi -
cation, specify;
( d )   any crypto-asset being a digital representation of value that relies
on a cryptographically secured distributed ledger or a similar tech -
nology to validate and secure transactions, whether or not such
asset is included in sub-clause ( a ) or ( b ) or ( c ),
where,—
( i )   “non-fungible token” means such digital asset as the Central Gov -
ernment may, by notification, specify;
( ii )   the Central Government may, by notification, exclude any digital
asset from this definition, subject to such conditions as specified
therein;
( 112 )   “zero coupon bond” means a bond—
( a )   issued by any infrastructure capital company or infrastructure
capital fund or infrastructure debt fund or public sector company
or scheduled bank on or after the 1st June, 2005;
( b )   for which no payment and benefit is received or receivable before
maturity or redemption from infrastructure capital company or
infrastructure capital fund or infrastructure debt fund or public
sector company or scheduled bank; and
( c )   which the Central Government may, by notification, specify,
where, the expression “infrastructure debt fund” means the infrastruc -
ture debt fund notified by the Central Government under Schedule VII
(Table: Sl. No. 46).
Definition of “tax year”.
3.   (1) For the purposes of this Act, “tax year” means the twelve months period
of the financial year commencing on the 1st April.
(2) In the case of a business or profession newly set up, or a source of income
newly coming into existence in any financial year, the tax year shall be the period
beginning with—
( a )   the date of setting up of such business or profession; or
( b )   the date on which such source of income newly comes into existence,
and ending with the said financial year.
CHAPTER II
BASIS OF CHARGE
Charge of Income-tax.
4.   (1) Where any Central Act enacts that income-tax shall be charged for any
tax year at any rate or rates, income-tax for such tax year shall be charged at
that rate or those rates in accordance with and subject to the provisions of this Act.

──────────

SOURCE PDF PAGE 27
(2) The charge of income-tax under sub-section (1) shall be on the total income of
the tax year of every person as per the provisions of this Act.
(3) Income-tax shall also include any additional income-tax, by whatever name
called, levied under this Act.
(4) If this Act provides that income-tax is to be charged in respect of income of a
period other than the tax year, it shall be charged accordingly.
(5) For the income chargeable under this section, income-tax shall be deducted or
collected at source or paid in advance as provided under this Act.
Scope of total income.
5.   (1) Subject to the provisions of this Act, the total income of any tax year
of a person, who is a resident, includes all income from whatever source derived,
which—
( a )   is received or deemed to be received in India in that year by or on behalf
of such person;
( b )   accrues or arises, or is deemed to accrue or arise, to such person in India
in that year; or
( c )   accrues or arises to such person outside India in that year, but when
such person is “not ordinarily resident” in India under section 6(13),
such income shall be included only when it is derived from a business
controlled in or a profession set up in India.
(2) Subject to the provisions of this Act, the total income of a tax year of a person,
who is a non-resident, includes all income from whatever source derived, which—
( a )   is received or deemed to be received in India in that year by or on behalf
of such person; or
( b )   accrues or arises, or is deemed to accrue or arise, to such person in India
in that year.
(3) Income accruing or arising outside India shall not be deemed to be received in
India under this section by reason only of the fact that it is taken into account in a
balance sheet prepared in India.
(4) If an income has been included in a person’s total income on the basis that it—
( a )   has accrued or arisen; or
( b )   is deemed to have accrued or arisen,
to such person, it shall not again be included on the basis that it is received or
deemed to be received by that person in India.
Residence in India.
6.   (1) For the purposes of this Act, residential status in India in a tax year of
a person shall be determined as per the provisions of this section.
(2) An individual shall be resident in India in a tax year, if he—
( a )   is in India for a total period of one hundred and eighty-two days or more
in that tax year; or

──────────

SOURCE PDF PAGE 28
( b )   is in India cumulatively for sixty days or more during that year and has
been in India cumulatively for three hundred and sixty-five days or more
in the four years preceding such tax year.
(3) The provisions of sub-section (2)( b ) shall not apply in the case of an individual
who is a citizen of India and leaves India in any tax year—
( a )   as a member of the crew of an Indian ship, as defined in section 3(18)
of the Merchant Shipping Act, 1958 (44 of 1958); or
( b )   for the purposes of employment outside India.
(4) The provisions of sub-section (2)( b ) shall not apply, subject to the provisions of
sub-section (5), in the case of an individual—
( a )   who is a citizen of India or a person of Indian origin; and
( b )   who being outside India, comes on a visit to India in any tax year.
(5) Where the person referred to in sub-section (4) has a total income exceeding
fifteen lakh rupees during the tax year referred therein (other than the income from
foreign sources), sub-section (2)( b ) shall apply as if the words “sixty days” had been
substituted with “one hundred and twenty days”.
(6) For the purposes of sub-section (2), if the individual is—
( a )   a citizen of India; and
( b )   a member of the crew of a foreign-bound ship leaving India,
the total number of days in India, in respect of that voyage, shall be determined in
such manner and subject to such conditions, as may be prescribed.
(7) Irrespective of the provisions of sub-sections (2) to (6), an individual shall be
deemed to be resident in India for a tax year, if he—
( a )   is a citizen of India;
( b )   is not liable to tax in any other country or territory due to his domicile,
residence, or similar criteria; and
( c )   has total income exceeding fifteen lakh rupees during such tax year (other
than the income from foreign sources).
(8) Sub-section (7) shall not apply to an individual, who is resident in India for a
tax year under sub-sections (2) to (6).
(9) A Hindu undivided family, firm or other association of persons shall be resident
in India in any tax year unless the control and management of its affairs is situated
wholly outside India during such tax year.
(10)( a ) A company is said to be a resident in India in any tax year, if—
( i )   it is an Indian company; or
( ii )   its place of effective management is in India in that tax year;
( b ) for the purposes of this sub-section, “place of effective management” means a
place where key management and commercial decisions necessary for the conduct
of business of the company as a whole are, in substance, made.

──────────

SOURCE PDF PAGE 29
(11) Every other person is resident in India in any tax year unless during that tax
year the control and management of the affairs of such person is situated wholly
outside India.
(12) If a person is resident in India in a tax year for any source of income, he shall
be deemed to be resident in India in that tax year for each of his other sources of
income.
(13) A person is not ordinarily resident in India in any tax year, if that person is—
( a )   an individual who has been, or a Hindu undivided family, whose manager
has been—
( i )   a non-resident in India in nine out of the ten tax years preceding
that year; or
( ii )   in India cumulatively for seven hundred and twenty-nine days or
less in seven tax years preceding that year; or
( b )   a citizen of India or a person of Indian origin,—
( i )   whose total income excluding income from foreign sources exceeds
fifteen lakh rupees during the tax year, as mentioned in sub-section
(5); and
( ii )   who has been in India cumulatively for one hundred and twenty
days or more but less than one hundred and eighty-two days during
the tax year; or
( c )   a citizen of India who is deemed to be resident in India under sub-section
(7).
(14) For the purposes of this section, “income from foreign sources” means the
income, which accrues or arises outside India (except income derived from a
business controlled in or a profession set up in India) and which is not deemed to
accrue or arise in In dia.
Income deemed to be received and dividend deemed to be income in a tax year.
7.   (1) The following incomes shall be deemed to be received in the tax year:—
( a )   the annual accretion in that year to the balance at the credit of an employee
participating in a recognised provident fund, to the extent provided in
paragraph 6 of Part A of Schedule XI;
( b )   the transferred balance in a recognised provident fund, to the extent
provided in paragraph 11(4) and (5) of Part A of Schedule XI;
( c )   the contribution made by the Central Government or any other employ -
er in that year to the account of an employee under a pension scheme
mentioned in section 124.
(2) For inclusion in the total income of an assessee,—
( a )   any dividend declared by a company or distributed or paid by it within
the meaning of section 2( 40 )( a ) to  
4
[ ( e ) ]   shall be deemed to be the income
4.   Substituted for “( f )” by the Finance Act, 2026, w.e.f.   1-4-2026 .

──────────

SOURCE PDF PAGE 30
of the tax year in which it is so declared, distributed or paid, as the case
may be;
( b )   any interim dividend shall be deemed to be the income of the tax year
in which the amount of such dividend is unconditionally made available
by the company to the member who is entitled to it.
Income on receipt of capital asset or stock-in-trade by specified person from
specified entity.
8.   (1) Where a specified person receives during the tax year any capital asset or
stock-in-trade, or both, from a specified entity in connection with the dissolution
or reconstitution of such specified entity, then the specified entity shall be deemed
to have transferred such capital asset or stock-in-trade, or both, to the specified
person in the year in which such capital asset or stock-in-trade, or both, are received
by the specified person.
(2) Any profits and gains arising from the deemed transfer mentioned in sub-section
(1) by the specified entity shall be—
( i )   deemed to be the income of such specified entity of the tax year in which
such capital asset or stock-in-trade, or both, were received by the specified
person; and
( ii )   chargeable to income-tax as income of such specified entity under the
head “Profits and gains of business or profession” or under the head
“Capital gains”.
(3) For the purposes of this section, fair market value of the capital asset or stock-
in-trade, or both, on the date of its receipt by the specified person shall be deemed
to be the full value of the consideration received or accruing as a result of such
deemed transfer mentioned in sub-section (1).
(4) If any difficulty arises in giving effect to the provisions of this section and section
67(10), the Board may, with the previous approval of the Central Government, issue
guidelines for removing the difficulty.
(5) Every guideline issued by the Board under sub-section (4) shall be laid before
each House of Parliament while it is in session for a total period of thirty days which
may be comprised in one session or in two or more successive sessions, and if,
before the expiry of the session immediately following the session or the successive
sessions aforesaid, both houses agree in making any modification in such guideline
or both Houses agree that the guideline, should not be issued, the guideline shall
thereafter have effect only in such modified form or be of no effect, as the case may
be; so, however, that any such modification or annulment shall be without prejudice
to the validity of anything previously done under that guideline.
(6) For the purposes of this section,—
( a )   “specified entity” means a firm or other association of persons or body
of individuals (not being a company or a co-operative society);
( b )   “specified person” means a person, who is a partner of a firm or mem -
ber of other association of persons or body of individuals (not being a
company or a co-operative society) in any tax year;
( c )   “reconstitution of the specified entity” means, where—