Under section 5(3) of the Income-tax Act, 2025, income that accrues or arises outside India

Section 5(3) provides that foreign income "shall not be deemed to be received in India" only because it is taken into account in a balance sheet prepared in India. Accounting entries alone do not bring foreign income of a non-resident or a not ordinarily resident person into the Indian tax net. A non-resident is taxed under section 5(2) only on income received or accruing in India, not on all foreign income.