Analysis of Provisions of Section 5 of the Income Tax Act, 1961

As per the provisions of this section, the total income of the previous year of a resident shall include income which:-

(a) is received or deemed to be received in India;

(b) accrues or arises or is deemed to accrue or arise in India;

(c) accrues or arises to him outside India;

Provided that incase of a person who is termed as not ordinary resident in India as per the meaning of section 6(6), all incomes shall be deemed to accrue or arise in India only if it is earned from a business set up in India or a profession which is controlled in India.

Further, in case of a non-resident all incomes from whatever source they are derived are included in the total income of such non-resident if they are received or deemed to be received in India or accrued or arises or deemed to accrue or arise in India.

The section also provides two explanations:
Explanation 1 states that income accruing or arising outside India shall not be deemed to be received in India only of the fact that it is taken into account in the balance sheet prepared in India.

Explanation 2 provides that if any income is taken into consideration when it accrued or arise or deemed to accrue or arise shall not be included again once it is received or is deemed to be received.

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