Section 7 of the Income Tax Act, 1961 – Income deemed to be received
Section 7 of the Income Tax Act, 1961 specifies the income that is deemed to be received in the previous year:
The annual accretion in the previous year to the balance to an employee's credit who participates in a recognised provident fund, to the extent specified in rule 6 of Part A of the Fourth Schedule.
According to rule 6 of Part A of the Fourth Schedule when an employer contributes more than 12% of an employee's salary to a recognised provident fund, and when interest is credited at a rate in excess of 8.5% on the balance to the employee's credit as set by the Central Government by notification in the Official Gazette, will be considered income that the employee received in the previous year, will be included toward his total income for that year, and will be subject to income tax.
The transferred balance in a recognised provident fund up to the extent allowed by rule 11 (4) of Part A of the Fourth Schedule.
The Assessing Officer shall determine the aggregate of all amounts included in a transferred balance that would have been subject to income tax if this Part had been in effect as of the date of the institution of the fund, without taking into account any taxes that may have been paid on any amounts, and such aggregate if any, shall be deemed to be income received by the employee in the previous year in which the recognition was made and will be part of his total income, subject to any rules that the Board may make in this regard and, for assessment purposes, the remaining transferred balance must not be considered. No other exemption or relief, whether in the form of a refund or otherwise, shall be allowed with respect to any amount included in such transferred balance. With the condition that, in instances of significant accounting difficulties, the Chief Commissioner or Commissioner may, subject to the aforementioned rules, compute such aggregate in a summary manner.
The contribution made to an employee's account under a pension scheme mentioned in section 80CCD by the Central Government or any other employer during the previous year.