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CS Executive · Tax Laws and Practice · Basic Concept of Income Tax

Under the Income-tax Act, 2025, what is the effect of income accruing outside India being merely shown in a balance sheet prepared in India?

Such income is not deemed to be received in India merely because it is taken into account in a balance sheet prepared in India. The section expressly denies receipt on that basis alone, so the entry does not by itself bring foreign income into the scope of total income.

  1. AIt is deemed received in India and taxed for every person
  2. BIt is deemed received in India only for a resident
  3. CIt is not deemed received in India merely for that reasonCorrect
  4. DIt is deemed received in India only if the amount is above the exemption limit

Explanation

Section 5(3) provides that income accruing or arising outside India is not deemed to be received in India by reason only of being taken into account in a balance sheet prepared in India. Hence the balance sheet entry alone does not create a charge. The other options invent conditions not in the section.

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