Section 278
Section 278: taxability of certain income
Section 278 overrides the normal method-of-accounting rule in Section 276 for three specific kinds of receipts, and fixes exactly which tax year each is taxed in.
Interest on compensation or enhanced compensation
Any interest an assessee receives on compensation or on enhanced compensation is deemed to be the income of the tax year in which it is received, irrespective of anything to the contrary in section 276 (the general method-of-accounting rule).
Price escalation and export incentive claims
Any claim for escalation of price in a contract, or for export incentives, is deemed to be the income of the tax year in which reasonable certainty of its realisation is achieved.
Income under Section 2(49)(w)
Income referred to in section 2(49)(w) is treated as the income of the tax year in which it is received, if it has not already been charged to income-tax in any earlier tax year.
Frequently asked questions
When is interest on enhanced compensation taxed?
In the tax year in which it is actually received, irrespective of the assessee's regular method of accounting under section 276.
When is a price-escalation or export-incentive claim taxed?
In the tax year in which reasonable certainty of its realisation is achieved, rather than automatically on accrual or receipt.
Related sections
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Talk to our tax team about this sectionLast updated 9 September 2026