Scope of Total Income under Income-tax Act, 2025 Explained

Introduction

The scope of total income determines which income is taxable in India and in whose hands. It is one of the most fundamental concepts of income-tax law. Under the Income-tax Act, 2025, this concept has been retained in substance but presented in a clearer and more structured manner compared to the Income-tax Act, 1961.

Understanding the scope of total income is essential for correct tax compliance, especially for individuals, businesses, and persons having income from India or abroad.

Meaning of Total Income

Total income refers to the aggregate income of a person computed in accordance with the provisions of the Income-tax Act after considering:

Incomes from all applicable heads

Exemptions and exclusions

Deductions as permitted under law

The scope of total income defines what is included and what is excluded from this computation.

Scope of Total Income under Income-tax Act, 2025

Under the Income-tax Act, 2025, the scope of total income depends primarily on the residential status of the taxpayer. The Act classifies taxpayers into:

Resident

Non-resident

The taxability of income varies based on this classification.

Income Taxable in the Case of Residents

For a resident, the scope of total income includes:

Income received or deemed to be received in India

Income accruing or arising in India

Income accruing or arising outside India

This means a resident is taxable on global income, subject to applicable reliefs under tax treaties.

Income Taxable in the Case of Non-Residents

For a non-resident, the scope of total income is restricted to:

Income received or deemed to be received in India

Income accruing or arising or deemed to accrue or arise in India

Foreign income earned and received outside India is generally not taxable for non-residents.

Section-wise Continuity from 1961 Act to 2025 Act

The Income-tax Act, 2025 continues the same basic framework as the Income-tax Act, 1961 regarding scope of total income. While section numbers may have been reorganised, the underlying principles remain unchanged.

Judicial interpretations under the 1961 Act continue to be relevant due to this continuity.

Why Scope of Total Income Is Important

Understanding the scope of total income helps in:

Determining tax liability correctly

Avoiding double taxation

Ensuring proper disclosure of foreign income

Applying tax treaty benefits accurately

Incorrect understanding can lead to non-compliance and litigation.

What Has Changed under the New Act

The changes under the Income-tax Act, 2025 are mainly:

Improved drafting and clarity

Logical placement of provisions

Better linkage with residential status provisions

There is no expansion of tax base merely due to restructuring.

Conclusion

The scope of total income under the Income-tax Act, 2025 continues to follow well-established principles while presenting them in a simpler and more organised structure. By maintaining continuity with the Income-tax Act, 1961 and improving clarity, the new Act ensures ease of compliance and certainty for taxpayers and professionals.

Written by

Abhishek Gupta
Chartered Accountant
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