Section 402 of the Income-tax Act, 2025: What Do TDS and TCS Terms Mean?
Section 402 provides special definitions for interpreting Chapter XIX on collection and recovery of tax. These meanings matter when identifying who must deduct or collect tax, which payments are covered, and which exclusions apply.
What is the purpose of Section 402?
The opening words, "For the purposes of this Chapter", limit these definitions to Chapter XIX. Section 402 is primarily an interpretation provision: it does not itself impose a separate TDS or TCS charge. The operative requirements must be read with the applicable provisions, particularly section 393 (tax deduction at source) and section 394 (tax collection at source).
Important definitions under Section 402
1. Agricultural land - clause (2)
Section 402 uses different treatments of agricultural land in India for the specified entries in section 393(1). For the entry at Table serial number 3(i), land in areas referred to in section 2(22)(iii) is excluded; for serial number 3(iii), such land is included. The relevant TDS entry must therefore be identified before applying the definition.
2. Incorrect claim apparent from a statement - clause (3)
This includes a claim evident from inconsistent entries within a statement, or a TDS or TCS rate in the statement that is not in accordance with the Act. It is relevant to processing and correction of tax statements.
3. Authorised dealer and banking company - clauses (4) and (5)
An authorised dealer is a person authorised by the Reserve Bank of India under section 10(1) of the Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security. A banking company is one to which the Banking Regulation Act, 1949 applies.
4. Contract - clause (10)
The term contract expressly includes a sub-contract. This prevents a payment from being treated as outside a relevant provision merely because the work is subcontracted.
5. Immovable property - clause (19)
For the purposes of the Chapter's defined term, immovable property means land other than agricultural land, or any building or part of a building. The special meaning of agricultural land and the particular deduction provision must also be considered.
6. Rent - clause (29)
Rent broadly covers payments under a lease, sub-lease, tenancy or other arrangement for use of land, buildings, machinery, plant, equipment, furniture or fittings, whether or not owned by the payee. For section 393(1), Table serial number 2(i), the definition is restricted to payments for land, buildings and land appurtenant to buildings.
7. Scrap - clause (31)
Scrap means waste and scrap arising from manufacture or mechanical working of materials that is definitely not usable as such because of breakage, cutting, wear or similar reasons.
8. Specified person - clause (37)
This includes persons other than individuals or Hindu undivided families and, in the stated context, individuals or HUFs whose business turnover exceeds Rs. 1 crore or professional receipts exceed Rs. 50 lakh in the immediately preceding tax year. The precise statutory provision and its exceptions govern application.
9. Specified senior citizen - clause (39)
A resident individual aged 75 years or more during the tax year who has pension income and no other income except qualifying interest from an account at the same specified bank, and who furnishes the prescribed declaration. All statutory conditions must be met.
10. Person responsible for paying - clause (27)
The identity of the responsible payer depends on the payment category, including salary, interest on securities, payments to non-residents and other chargeable sums. For a company employer, the definition includes the company and its principal officer as specified in the provision.
11. Work - clause (47)
The inclusive definition covers advertising, broadcasting and telecasting (including programme production), carriage of goods or passengers other than by railways, catering, and certain manufacturing or supply arrangements. The statutory conditions concerning materials and customer specifications are important.
How are "buyer" and "seller" defined?
Buyer - clause (6): The definition is transaction-specific. For the purchase-of-goods entry in section 393(1), Table serial number 8(ii), it refers to a person whose business sales, gross receipts or turnover exceeded Rs. 10 crore in the immediately preceding tax year, subject to notified exclusions. Other buyer definitions apply to specified goods, motor vehicles and remittances under the Liberalised Remittance Scheme, with their own exclusions.
Seller - clause (33): For specified goods under section 394(1), Table serial numbers 1 to 6, the definition includes listed public bodies and entities and qualifying individuals or HUFs whose preceding-year turnover or receipts exceed Rs. 1 crore for business or Rs. 50 lakh for profession. For overseas tour programme packages, the seller is the person selling the package.
The statutory tables contain category-specific inclusions and exclusions. Do not apply the turnover thresholds universally to every TDS or TCS transaction.
Other terms addressed by Section 402
Section 402 also defines or cross-refers to Administrator, designated person, Foreign Institutional Investor, goods carriage, investor, licensee or lessee, licensor or lessor, non-resident Indian, Offshore Banking Unit, online gaming intermediary, overseas tour programme package, royalty, securities, services, specified bank, specified company, special purpose vehicle, time deposits, unit, Unit Trust of India, University, user and user account, among others. Some definitions incorporate meanings from other enactments or sections and must be read with those provisions.
How should taxpayers apply these definitions?
- Identify the payment or transaction and the exact entry under section 393 or 394.
- Read the corresponding definition in section 402, including its table entry and exclusions.
- Check whether a threshold refers to the current tax year or the immediately preceding tax year.
- Apply the relevant rate, timing, reporting and compliance provisions separately.
- Preserve supporting records for classification, turnover, status and any exemption or exclusion claimed.
Frequently asked questions
Does Section 402 itself require tax deduction or collection?
No. It defines expressions used in Chapter XIX. Deduction and collection obligations arise under the applicable operative provisions.
Does "rent" include machinery and equipment?
The general definition includes these assets, but section 402 expressly narrows the meaning for the specified entry in section 393(1). Always check the particular table entry.
Are all buyers subject to the Rs. 10 crore turnover test?
No. That threshold applies to the specified purchase-of-goods entry; other transactions have different definitions and exclusions.
Where can I read the complete list of definitions?
Consult the official text of section 402, including its tables and cross-references. This article explains selected important terms rather than reproducing every statutory clause.
Official legislation and related provisions
Last reviewed: 12 November 2026. This page is a general statutory guide and not a substitute for the applicable Act, rules, notifications or professional advice.