Income may be brought within the tax computation even without a direct cash payment when legislation specifically treats it as received. Section 7 identifies certain employee fund and pension amounts for this purpose.
What is income deemed to be received?
Deemed receipt is a statutory rule that treats specified income as received for tax purposes, regardless of whether the individual physically receives money in that period. It is different from income deemed to accrue or arise in India, which concerns source-based accrual rules under Section 9.
Section 7 of the Income-tax Act, 2025
Under Section 7(1) of the Income-tax Act, 2025, the following are deemed received during the tax year, subject to the specified limits and conditions:
| Provision | Income treated as received | Related reference |
|---|---|---|
| Section 7(1)(a) | Annual accretion to an employee's credit in a recognised provident fund, to the extent specified by law. | Paragraph 6, Part A, Schedule XI |
| Section 7(1)(b) | Transferred balance in a recognised provident fund, to the prescribed extent. | Paragraph 11(4) and (5), Part A, Schedule XI |
| Section 7(1)(c) | Contribution made by the Central Government or another employer to an employee's account under the specified pension scheme. | Section 124 |
Dividend deemed income: Section 7(2)
Section 7(2) also sets the tax year for dividend income. Generally, a dividend declared, distributed or paid by a company under the specified definition is treated as income of that tax year. An interim dividend is treated as income in the tax year when it is unconditionally made available to the entitled shareholder. This consolidates the subject formerly dealt with under Section 8 of the Income-tax Act, 1961.
Section 7 of the Income-tax Act, 1961
Under the 1961 Act, Section 7 covered three principal categories: taxable annual accretions to a recognised provident fund under Rule 6 of Part A of the Fourth Schedule; taxable transferred balances under Rule 11(4) of Part A of that Schedule; and government or employer contributions under a pension scheme referred to in Section 80CCD. The applicable treatment was subject to the relevant limits, exclusions and related provisions.
Practical examples
Example 1: Recognised provident fund
An employee's provident fund account earns an annual accretion. Section 7 does not automatically make the entire accretion taxable. Only the amount falling within the conditions and limits prescribed by the applicable schedule is treated as deemed received.
Example 2: Employer pension contribution
An employer credits a contribution to an eligible pension account. The relevant Section 7 provision may treat that contribution as received in the tax year, while the separate provisions governing inclusion, deductions and limits determine its final tax treatment.
Example 3: Interim dividend
A company announces an interim dividend in March but makes it unconditionally available to shareholders in April. Under Section 7(2)(b) of the 2025 Act, the relevant tax year is determined by when the dividend is unconditionally made available, rather than the announcement alone.
Comparison of the two Acts
| Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|
| Section 7: income deemed to be received | Section 7(1): income deemed to be received in a tax year |
| Section 8: dividend income | Section 7(2): dividend deemed income in a tax year |
| Fourth Schedule, Part A | Schedule XI, Part A |
| Section 80CCD pension reference | Section 124 pension reference |
Original Section 7 text and legislative history
The following material is preserved from the original webpage as a historical reference to the 1961 Act. Its legislative footnotes are not a substitute for the latest consolidated official statute.
The following incomes shall be deemed to be received in the previous year:-
(i) the annual accretion in the previous year to the balance at the credit of an employee participating in a recognised provident fund, to the extent provided in rule 6 of Part A of the Fourth Schedule;
(ii) the transferred balance in a recognised provident fund, to the extent provided in sub-rule (4) of rule 11 of Part A of the Fourth Schedule;
1 (iii) the contribution made, by the Central Government 2 or any other
employer in the previous year, to the account of an employee under a pension
scheme referred to in section 80CCD.
----------------------
1. Subs. by Act 22 of 2007, s. 4 (w.e.f. 1-4-2004).
2. Subs. by Act 10 of 1965, s. 5, for "For the purposes of inclusion in the
total income of an assessee, any dividend" (w.e.f. 1-4-1965).
Frequently asked questions
What does deemed receipt of income mean?
It means the law treats specified amounts as received during a tax year even if they have not been paid directly into the employee's bank account.
What does Section 7(1) of the Income-tax Act, 2025 cover?
It covers specified annual accretions and transferred balances in recognised provident funds, and employer contributions under the pension scheme mentioned in section 124.
Does Section 7 of the 2025 Act also address dividends?
Yes. Section 7(2) determines the tax year in which declared or distributed dividends and interim dividends are deemed income.
Are all provident fund earnings taxable under Section 7?
No. The provision applies only to the extent specified in the relevant Schedule XI rules and other applicable tax provisions.
Official legal sources
- Income-tax Act, 2025 - Section 7 (Income Tax Department)
- Income-tax Act, 2025 as amended by Finance Act, 2026 (official PDF)
- Income Tax Department - 2025 Act, rules and transition resources
- Income-tax Act, 2025 - Section 5 (scope of total income)
Information is educational and should be read with the applicable Finance Act, schedules, rules and transitional provisions for the relevant year.