Section 7 — Income deemed to be received and dividend deemed to be income in a tax year. Successor to s.7, s.8 of the 1961 Act.
Section 7 is in Chapter II — Basis of Charge, which runs from section 4 to section 10.
Sub-section (1) deems three amounts to be received in the tax year though the employee has not touched them: the annual accretion to the balance credited to an employee in a recognised provident fund, to the extent provided in paragraph 6 of Part A of Schedule XI; the transferred balance in such a fund, to the extent provided in paragraph 11(4) and (5) of that Part; and the contribution made in that year by the Central Government or any other employer to an employee's account under a pension scheme mentioned in section 124.
Sub-section (2) fixes the year in which a dividend enters total income. A dividend declared by a company, or distributed or paid by it within the meaning of section 2(40)(a) to (e), is income of the tax year in which it is so declared, distributed or paid; the closing reference was changed from "(f)" to "(e)" by Act No. 4 of 2026 with effect from 1 April 2026. An interim dividend is income of the tax year in which the amount is unconditionally made available by the company to the member entitled to it.
Two kinds of income have no obvious moment of receipt, and the section supplies one. Retirement-fund accretions and employer pension contributions accrue to an employee's credit without any payment reaching him. Dividends can be declared in one year and paid in another, so the year is pinned to declaration for a final dividend and to unconditional availability for an interim one.
The taxable year for a final dividend is the year of declaration, distribution or payment, not the year the money reaches the shareholder's account; for an interim dividend it is the year the company puts the amount unconditionally at the member's disposal, which can be later than the resolution announcing it. Clauses (1)(a) and (b) deem accretions received only "to the extent provided in" the Schedule XI paragraphs they name; clause (1)(c) has no such limiting words.
A company's board resolves on an interim dividend in March and the amount is credited unconditionally to members' accounts in April, in the next tax year. Under sub-section (2)(b) the dividend is income of that later year. Had the company declared a final dividend in March and paid it in May, sub-section (2)(a) would fix the earlier year.
You meet this section when deciding which year's return a dividend belongs in, and in a salary computation that shows an employer's pension contribution or a provident fund accretion as income though nothing was paid out.
any interim dividend shall be deemed to be the income of the tax year in which the amount of such dividend is unconditionally made available by the company to the member who is entitled to it
the contribution made by the Central Government or any other employer in that year to the account of an employee under a pension scheme mentioned in section 124
See the full 1961 to 2025 concordance.
See every circular and notification on this section, or the circulars index.
See every circular and notification on this section, or the notifications index.