Section 2
Section 2: definitions
Section 2 is the definitions section of the Income-tax Act, 2025. It opens with the words "In this Act, unless the context otherwise requires" and then sets out 112 numbered clauses defining terms used throughout the Act - everything from who counts as an "assessee" to what a "virtual digital asset" is. Because these definitions apply across the whole Act unless a specific section says otherwise, getting them right matters for reading almost every other provision correctly. This page summarises the most commonly relevant definitions in plain language; for the complete, word-for-word list of all 112 clauses, the bare Act text is the authoritative source.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
How Section 2 is structured
The section is a single running list of defined terms, numbered (1) to (112), arranged alphabetically by the term being defined (from "accountant" to "zero coupon bond"). Some entries are short one-line definitions; others - such as "capital asset", "company", "dividend", "income" and "transfer" - run into detailed multi-part definitions with their own explanations and carve-outs.
A number of terms are defined by cross-reference to other sections of this Act (for example, "annual value" refers to section 21, and "resident" refers to section 6) or to other laws (for example, "firm" takes its meaning from the Indian Partnership Act, 1932, and "recognised stock exchange" from the Securities Contracts (Regulation) Act, 1956).
Some frequently used definitions
A selection of terms from Section 2 that come up often for individual and business taxpayers:
| Term | What Section 2 says (in summary) |
|---|---|
| Assessee | A person by whom any tax or other sum is payable under the Act, including a person against whom proceedings have been taken, a person deemed to be an assessee, and a person deemed to be an assessee in default. |
| Person | Includes an individual, a Hindu undivided family, a company, a firm, an association of persons or body of individuals, a local authority, and every other artificial juridical person. |
| Income | An inclusive (not exhaustive) definition covering profits and gains, dividend, certain voluntary contributions, perquisites and profits in lieu of salary, specified allowances, capital gains, lottery/gambling winnings, certain subsidies/grants from government, and several other specific items listed in the clause. |
| Capital asset | Property of any kind held by an assessee (whether or not connected with business or profession), with specific inclusions (e.g. certain securities, certain unit-linked insurance policies) and exclusions (e.g. stock-in-trade, personal effects, most agricultural land in India, certain Gold Deposit Bonds). |
| Agricultural income | Rent or revenue from land in India used for agricultural purposes, income from agricultural operations on such land, certain income from farmhouses connected to the land, and income from saplings/seedlings grown in a nursery - subject to detailed conditions in the clause. |
| Business | Includes any trade, commerce or manufacture, or any adventure or concern in the nature of trade, commerce or manufacture. |
| Firm | Has the meaning given in the Indian Partnership Act, 1932, and also includes a limited liability partnership under the Limited Liability Partnership Act, 2008. |
| Relative | In relation to an individual: the husband, wife, brother, sister, or any lineal ascendant or descendant (maternal or paternal) of that individual. |
| Senior citizen | An individual resident in India who is 60 years of age or more at any time during the relevant tax year. |
| Transfer (of a capital asset) | A wide, inclusive definition covering sale, exchange, relinquishment, extinguishment of rights, compulsory acquisition, conversion into stock-in-trade, maturity/redemption of a zero coupon bond, and certain transactions involving immovable property, among other things. |
| Virtual digital asset | Any information, code, number or token (not being Indian or foreign currency) generated through cryptographic means or otherwise, representing value and transferable/storable/tradeable electronically; includes non-fungible tokens and other crypto-assets as notified. |
| PAN (Permanent Account Number) | A unique ten-character alphanumeric number allotted by the Assessing Officer to a person for identification under the Act. |
| Non-resident | A person who is not a "resident" as defined in section 6; for certain specified sections, also includes a person who is "not ordinarily resident" under section 6(13). |
Why this section matters
Because Section 2 definitions apply "unless the context otherwise requires", they act as the shared vocabulary for the rest of the Act. Several definitions themselves point onward to detailed machinery elsewhere - for instance, "capital asset" interacts with the capital gains chapter, "dividend" interacts with sections on deemed income, and "resident"/"non-resident" interact with section 6 on residential status.
Given the length and technical detail of this section (112 separate clauses, several of them multi-part), taxpayers dealing with an unusual term should check the exact wording in the Act or Schedule referred to, rather than relying on how the equivalent term was defined under the earlier Income-tax Act, 1961 - definitions have been renumbered and, in places, revised in this new Act.
Frequently asked questions
Does Section 2 define every term used in the Act?
It defines 112 terms used generally across the Act. Many other terms are defined locally within the specific section or Schedule where they are used, rather than in Section 2.
Is the definition of 'resident' in Section 2?
Section 2(96) simply says "resident" means a person who is resident in India as per section 6 - the detailed residency tests themselves are set out in Section 6, not Section 2.
Are cryptocurrencies covered under this Act?
Section 2(111) defines "virtual digital asset" to include cryptographically generated tokens of value (including non-fungible tokens and other crypto-assets), which is the term this Act uses for what are commonly called cryptocurrencies and similar digital assets.
Related sections
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Talk to our tax team about this sectionLast updated 9 September 2026