Section 396
Section 396: tax deducted is deemed income received
Section 396 is a short deeming provision that makes the TDS mechanism work correctly with gross-income computation - the amount deducted as tax is treated as if the assessee actually received it, so total income is computed on the gross (pre-TDS) figure.
What is deemed to be income received
The following sums are deemed to be income received for the purpose of computing an assessee's income:
- Sums deducted under this Chapter (TDS); and
- Income-tax paid outside India by way of deduction, in respect of which the assessee is allowed a credit against tax payable under this Act - except tax paid under Section 392(2)(a) (employer-borne perquisite tax) and tax deducted under Section 393(3) [Table Sl. No. 5] (TDS on cash withdrawals).
Frequently asked questions
Why does the law deem TDS as income received?
So that an assessee's total income is computed on the gross amount (before TDS) rather than the net amount actually received, which is consistent with claiming credit for the TDS deducted.
Are all types of foreign tax deduction covered by Section 396?
No - it excludes tax paid under Section 392(2)(a) and tax deducted under Section 393(3) [Table Sl. No. 5] (TDS on cash withdrawals).
Related sections
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Talk to our team about TDS credit and gross income computationLast updated 9 September 2026