Section 2 of the Income-tax Act, 2025: What Are the Key Definitions?
Section 2 sets out the statutory meanings of expressions used throughout the Income-tax Act, 2025. These definitions are the starting point for interpreting liability, assessment, taxable income, transactions and compliance.
What does Section 2 provide?
Section 2 is the definitions provision in Chapter I (Preliminary). It opens with the qualification "unless the context otherwise requires". Consequently, a defined expression generally carries its statutory meaning throughout the Act, subject to its context and any more specific provision.
The section includes definitions that operate by reference to other provisions, and definitions containing detailed inclusions, exclusions, explanations and conditions. The descriptions below are explanatory summaries, not substitutes for the full statutory text.
Important definitions under Section 2
Accountant - Section 2(1)
The term has the meaning assigned under section 515(3)(b). That cross-reference matters where the Act requires a report, certificate or audit by an accountant.
Advance tax - Section 2(4)
Advance tax means the advance tax payable under Chapter XIX-C. The relevant provisions determine the liability, instalments and manner of payment.
Agricultural income - Section 2(5)
The definition covers qualifying rent or revenue from agricultural land situated in India and certain income from agricultural operations, customary processing and sale of agricultural produce. It also addresses specified income connected with agricultural buildings, subject to statutory conditions.
Practical point: Merely receiving income from land does not automatically make it agricultural income. The nature, location and use of the land, and the activity generating the income, must be examined.
Assessee
An assessee generally includes a person liable to pay tax or another sum under the Act, and persons brought within the definition through assessment proceedings or deeming provisions. The precise scope is determined by the statutory definition.
Assessment
The statutory concept includes reassessment. Whether a proceeding is an assessment, reassessment or another procedure affects the applicable powers, notices and time limits.
Business
Business includes trade, commerce, manufacture and an adventure or concern in the nature of trade, commerce or manufacture. The definition may extend beyond a continuously operated enterprise.
Capital asset
A capital asset broadly concerns property held by an assessee, whether or not connected with business or profession, subject to the specific exclusions provided in the Act. Classification matters for capital gains and related provisions.
Income
Income is an inclusive statutory expression. Its scope must be read with the charging provisions, exclusions, deeming rules and the particular heads of income.
Person - Section 2(77)
The definition includes an individual, Hindu undivided family, company, firm, association of persons or body of individuals, local authority and artificial juridical person, as specified in the Act. It determines who may be treated as a taxable person.
Resident and non-resident
Residential status is determined by the applicable residence provisions and relevant definitions. It can affect the scope of income chargeable to tax in India; citizenship alone does not establish income-tax residence.
Tax year
The 2025 Act uses the concept of a tax year for the relevant period of income computation. The operative statutory definition and provisions governing a newly established business or source of income must be considered.
Total income - Section 2(108)
Total income means the total amount of income referred to in section 5, computed in the manner laid down in the Act. It is therefore not necessarily the same as gross receipts or gross earnings.
How do Section 2 definitions affect tax cases?
Definitions are relevant at every stage of income-tax analysis. They help identify the taxable person, classify receipts and assets, interpret transactions, determine the scope of total income, and apply procedural requirements. A defined term should be read together with the operative section, rather than in isolation.
Frequently asked questions
Is Section 2 a charging section?
No. Section 2 principally supplies definitions. Tax liability must be established under the relevant charging and computation provisions.
Are all definitions in Section 2 exhaustive?
No. Some use the word "means", others use "includes", and some incorporate another provision by reference. The precise statutory wording controls interpretation.
Does the Income-tax Act, 2025 apply from 1 April 2026?
Yes, generally, subject to provisions specifying otherwise and the applicable transitional rules.
Can a term have a different meaning elsewhere in the Act?
Yes, where context requires or a specific provision supplies a special meaning. Section 2 itself recognises contextual interpretation.
Official law and reference material
Last reviewed: 10 November 2026. This article provides general legal information, not advice on any particular assessment or transaction.