Scope of total income
[Section 5 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 5(1) of Income Tax Act 2025
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 the person; or
- (b) accrues or arises, or is deemed to accrue or arise, to the person in India in that year; or
- (c) accrues or arises to the person outside India in that year, but when such person is “not ordinarily resident” in India under section 6(13), it shall be included only when it is derived from a business controlled in or a profession set up in India.
Section 5(2) of Income Tax Act 2025
5(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 the person; or
- (b) accrues or arises, or is deemed to accrue or arise, to the person in India in that year.
Section 5(3) of Income Tax Act 2025
5(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.
Section 5(4) of Income Tax Act 2025
5(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 the person, it shall not again be included on the basis that it is received or deemed to be received by the person in India.
FAQs on Section 5 of the Income Tax Act, 2025
1. Who is considered a “resident” for tax purposes under the Income Tax Act, 2025?
A resident is a person whose global income is taxable in India, including income received, accrued, or arising both in India and outside India. However, if the person qualifies as “not ordinarily resident” under Section 6(13), only income from a business controlled in India or a profession set up in India is taxable.
2. What constitutes the total income of a resident for a tax year?
As per Section 5(1), the total income of a resident includes:
- Income received or deemed to be received in India.
- Income accruing or arising, or deemed to accrue or arise in India.
- Income accruing or arising outside India, unless the person is “not ordinarily resident.”
3. How is the total income of a non-resident determined?
Under Section 5(2), a non-resident’s total income includes only:
- Income received or deemed to be received in India.
- Income accruing or arising, or deemed to accrue or arise in India.
Any income accruing or arising outside India is not included.
4. Does income accrued outside India but recorded in Indian accounts become taxable?
No, as per Section 5(3), income that accrues or arises outside India is not deemed to be received in India merely because it is recorded in a balance sheet prepared in India.
5. Can the same income be taxed twice under different provisions?
No, as per Section 5(4), if an income has already been taxed based on accrual or deemed accrual, it will not be taxed again when received or deemed to be received in India.
6. How is income from foreign sources treated for “not ordinarily resident” individuals?
For a “not ordinarily resident” individual, income earned outside India is taxable only if it is derived from a business controlled in India or a profession set up in India.
7. What is meant by “deemed to accrue or arise” in India?
Certain types of income, such as salary paid by the Government of India to a citizen for services outside India or income from an asset or business connection in India, are considered to have accrued or arisen in India, even if received outside India.
The scope of total income under Section 5 of the Income Tax Act, 2025, determines the taxability of income based on a person’s residential status. Residents are taxed on their global income, whereas non-residents are taxed only on income received or accrued in India. Special provisions apply to “not ordinarily resident” individuals, limiting taxation on foreign income to business or professional earnings linked to India.
Additionally, the Act ensures that income is not taxed twice and clarifies that mere accounting in India does not constitute income receipt. Understanding these provisions is crucial for accurate tax compliance and financial planning.
