Tax deducted is income received
[Section-396 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
The following sums shall be deemed as income received for the purposes of computing the income of an assessee—
- (a) amount deducted under this Chapter; and
- (b) income-tax paid outside India by way of deduction in respect of which an assessee is allowed a credit against the tax payable under this Act,
except tax paid under section 392(2)(a) and tax deducted as per section 393(3) (Table: Sl. No. 5).
FAQs on Section 396 of Income Tax Act 2025
What does Section 396 of the Income Tax Act, 2025 deal with?
Section 396 specifies that certain sums are deemed to be income received for the purpose of computing an assessee’s income.
Which amounts are considered as income received under this section?
The amounts deemed as income received include:
(a) any amount of tax deducted under the relevant Chapter; and
(b) income-tax paid outside India by way of deduction, for which the assessee is allowed a credit under the Act.
Is foreign tax deducted at source treated as income received in India?
Yes, foreign income-tax paid by way of deduction is treated as income received, provided the assessee is allowed a credit under the Act.
Are all foreign taxes included in the deemed income under Section 396?
No, foreign taxes paid under Section 392(2)(a) and tax deducted under Section 393(3) [Sl. No. 5 of the Table] are specifically excluded from this deeming provision.
Why is tax deducted at source treated as income received?
It is treated as income received to ensure that tax deducted before payment to the assessee is still considered part of their gross income for taxation purposes.
Is this deeming provision applicable to all assessees?
Yes, it applies generally to all assessees unless specifically excluded under provisions like Section 392(2)(a) or Section 393(3) Table Sl. No. 5.
From when is Section 396 applicable?
Section 396 is effective from 1st April, 2026.
Does this section result in double taxation?
No, although the tax deducted is deemed income received, the assessee is usually eligible for credit or refund, thereby avoiding double taxation.
How does Section 396 impact income computation?
By deeming tax-deducted amounts and eligible foreign tax credits as income received, it increases the gross income reported, though tax already deducted is adjusted against tax liability.
Does this section require the assessee to include TDS in gross income?
Yes, tax deducted at source must be included in the gross income under this section, even if the actual cash received is lower.
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