Section 7 of the Income Tax Act, 1961 deals with "Income deemed to be received." Unlike actual receipt of income, this provision ensures that certain types of income are treated as received by the taxpayer even if they are not physically in hand. The rationale is to prevent tax avoidance and bring such incomes within the tax net. Examples include contributions by the employer to recognized provident funds beyond specified limits, transferred balances from unrecognized provident funds to recognized provident funds, and the annual accretion to the balance of a recognized provident fund beyond the exempt threshold. This section emphasizes that for taxation purposes, the timing of "receipt" is not limited to cash or credit in hand but also extends to deemed scenarios defined under the law.
7. 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 ; | |
| (iii) | the contribution made, by the Central Government or any other employer in the previous year, to the account of an employee under a pension scheme referred to in section 80CCD. |