What is deemed income for tax purposes?

Deemed income for tax purposes refers to income that is considered to have been received by a taxpayer, regardless of whether actual cash has been physically received. This concept is significant in tax law because it ensures that taxpayers are taxed on all forms of income that are accessible to them, even if they have not yet converted those earnings into cash.

For example, if a business has provided a service and issued an invoice, the income from that service may be treated as deemed income once the service is rendered, even if payment from the client has not yet been received. This principle prevents taxpayers from deferring their tax liabilities by simply delaying receipt of payments.

The other options describe various aspects of income but do not capture the essence of deemed income. Income received in cash is straightforward and does not encompass the broader definition. Income that has been earned but not yet paid is a concept linked to accounts receivable but does not explicitly define deemed income. Income earned from investments only is a narrow category and does not apply to all relevant situations where deemed income might arise. Thus, the most accurate understanding of deemed income is that it includes all types of income considered received for tax purposes, irrespective of the actual cash flow.