Library / Income-tax Act, 2025: The Professional's Master Guide

5. Scope of Total Income and Deemed Accrual (Sections 5, 7 and 9)

Residential status tells us which categories of income are taxable. This chapter explains how to apply that to actual items of income, and the concepts of receipt, accrual and deemed accrual that decide whether income is "in India".

5.1 Received, accrued and deemed

Concept	Meaning	Examples
Received in India	The first receipt of the income by the taxpayer or on his behalf in India. Remittance of income already received abroad is not a fresh receipt	Salary credited directly into an Indian bank account by a foreign employer
Deemed received (section 7)	Amounts treated as received even though not in hand	TDS deducted, employer contribution to recognised PF above the exempt limit, interest credited to PF above the exempt rate
Accrues or arises in India	The right to receive arises in India	Fees for services performed in India, rent from property in India
Deemed to accrue in India (section 9 and Schedule I)	Specific categories treated as Indian income even if the payer or the activity is abroad	Salary for services in India, royalty and FTS paid by residents, interest paid by residents, business connection, SEP, indirect transfers

5.2 Worked example across the three statuses

Illustration 12: Scope of total income

Ravi has the following income in Tax Year 2026-27. Compute his total income if he is (a) ROR, (b) RNOR, (c) non-resident.

Item	ROR	RNOR	NR
Salary for services in India, received in the UAE: 10,00,000	10,00,000	10,00,000	10,00,000
Interest from an Indian bank: 2,00,000	2,00,000	2,00,000	2,00,000
Rent from a London flat, received in London: 6,00,000	6,00,000	Nil	Nil
Profit of a Dubai business controlled from India: 8,00,000	8,00,000	8,00,000	Nil
Dividend from a US company received in the US: 1,00,000	1,00,000	Nil	Nil
Foreign income of earlier years brought into India: 5,00,000	Nil	Nil	Nil
Profit of a Singapore business controlled from Singapore, received in India: 3,00,000	3,00,000	3,00,000	3,00,000
Total income	30,00,000	23,00,000	15,00,000

Two lessons: remittance of past foreign income is never income again, and income received in India is taxable for everyone, whatever the source. For a non-resident, having foreign income paid into an Indian account can make it taxable; paying it abroad and then remitting keeps it out.

5.3 Salary of non-residents

Salary for services rendered in India is deemed to accrue in India wherever paid. Salary paid by the Government of India to a citizen for services outside India is also Indian income. Leave salary for leave taken during service in India follows the same rule. For short visits, relief is available under the Act (foreign employer, stay up to 90 days, salary not charged to Indian income) or under the relevant tax treaty (usually 183 days).

5.4 Interest, royalty and FTS: the source rule

Interest, royalty and FTS are deemed to accrue in India if paid by the Government, by a resident (except where used for a business or source outside India), or by a non-resident where used for a business or source in India. Income from services is taxed in India even if the non-resident does not render services in India, as long as the payer uses them for business in India. This was clarified after the Supreme Court's decision in Ishikawajima-Harima Heavy Industries Ltd. v. DIT (2007), which had required a territorial nexus.

Chapter summary

• Residents are taxed on global income; RNORs and non-residents mainly on Indian income.

• Income received in India is taxable for everyone; remittance of past income is not income.

• Section 9 with Schedule I lists income deemed to accrue in India: salary for Indian services, royalty, FTS and interest from residents, business connection, SEP and indirect transfers.