Section 2 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Clauses (49) to (76) of section 2 start with the widest definition in the Act, "income", and run through "India", "Indian company", "interest", "long-term capital asset", "manufacture", "maximum marginal rate", "non-resident", "partner" and "Permanent Account Number". This article explains them as per the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, in the order of the text.
"Income" in clause (49) is an inclusive definition with 23 limbs, (a) to (w), covering profits and gains, dividend, perquisites, capital gains, winnings, certain subsidies and more. "India" includes territorial waters, the continental shelf, the exclusive economic zone and the air space above. "Interest" includes service fee and charges on an unutilised credit facility. Section 2 was amended by section 35 of the Finance Act, 2026. Where a clause leaves a matter to a notification or to the Finance Act of the relevant year, the figure is not stated here.
Where this article sits
Section 2 is split over several articles. This one takes clauses (49) to (76); the earlier ones are clauses 1 to 21 and clauses 36 to 48; the next is clauses 77 to 100. Which receipts are income decides what goes into a return; if you want it checked for your own case, see our income tax return filing support.
Clause (49): what "income" includes
The word "includes" means the list is not closed. The twenty-three limbs are:
| Limb | Item included in income |
|---|---|
| (a), (b) | Profits and gains; dividend |
| (c) | Voluntary contributions received by a registered non-profit organisation, an association referred to in Schedule III (Table: serial number 23), a university, educational institution, hospital or other institution referred to in Schedule VII (Table: serial number 19), or an electoral trust |
| (d) | The value of any perquisite or profit in lieu of salary taxable under sections 17 and 18 |
| (e) | A special allowance or benefit, other than a perquisite in (d), specifically granted to meet expenses wholly, necessarily and exclusively for the duties of an office or employment of profit |
| (f) | An allowance granted to meet personal expenses at the place of duty or residence, or to compensate for increased cost of living |
| (g) | The value of a benefit or perquisite obtained from a company by a director, a person with a substantial interest in the company, or a relative of either, and any sum paid by the company for an obligation that would otherwise have been payable by that person |
| (h) | The value of a benefit or perquisite obtained by a representative assessee mentioned in section 303(1)(c) or (d), or by the beneficiary, and any sum paid by the representative assessee for an obligation of the beneficiary |
| (i), (j) | Sums chargeable under section 26(2)(b), (c), (d), (e) or (g), section 38 or section 95; and a benefit or perquisite taxable under section 26(2)(f) |
| (k) | Capital gains chargeable under section 67 |
| (l) | Profits of insurance business of a mutual insurance company or co-operative society computed as per section 55, or any surplus taken as such profits as per Schedule XIV |
| (m) | Profits of banking business (including providing credit facilities) carried on by a co-operative society with its members |
| (n) | Winnings from lotteries, crossword puzzles, races including horse races, card games and other games of any sort, or gambling or betting of any form or nature |
| (o) | Sums received by the assessee from employees as contributions to a provident fund, superannuation fund, Employees' State Insurance fund or other employee welfare fund |
| (p) | Sums received under a Keyman insurance policy, including bonus allocated |
| (q) to (v) | Sums and values referred to in section 26(2)(h), the fair market value of inventory referred to in section 26(2)(j), and sums or property referred to in section 92(2)(k), (l), (h), (m) and (j) |
| (w) | Assistance by way of subsidy, grant, cash incentive, duty drawback, waiver, concession or reimbursement, by whatever name called, by the Central Government, a State Government or any authority, body or agency, in cash or kind, other than (i) an amount taken into account for the actual cost of the asset as per section 39(1)(d) and (3), and (ii) a subsidy or grant by the Central Government for the corpus of a trust or institution established by the Central or a State Government |
Three meanings travel with the clause. A "card game and other game of any sort" includes any game show or entertainment programme on television or electronic mode in which people compete to win prizes, or any similar game. "Keyman insurance policy" has the meaning in Schedule II (Note 1). "Lottery" includes winnings from prizes awarded by draw of lots or chance or in any other manner under any scheme or arrangement, called by any name.
Example: a game-show prize
Neha takes part in a television quiz in which people compete to win prizes and she wins a prize in cash. Under clause (49)(n) and the meaning in item (A), "card game and other game of any sort" includes a game show on television, so the prize falls in the list of winnings that "income" includes. The clause does not give a rate; the tax on such winnings is found in the charging provisions.
Clauses (50) to (58): standards, officers, India, companies
- Income Computation and Disclosure Standards (50): standards as may be notified under section 276(2). What has been notified is not in the text consulted.
- Income-tax Officer (51) and Inspector of Income-tax (57): persons appointed under section 237(1).
- India (52): the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying them, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and Other Maritime Zones Act, 1976, and the air space above its territory and territorial waters.
- Indian company (53): a company formed and registered under the Companies Act, 2013, including a company formed and registered under any law relating to companies formerly or currently in force in any part of India, a corporation established by or under a Central, State or Provincial Act, and an institution, association or body declared by the Board to be a company under clause (28), in each case with its registered or principal office in India.
- Indian currency (54): the meaning in section 2(q) of the Foreign Exchange Management Act, 1999.
- Infrastructure capital company (55): a company that invests by acquiring shares or providing long-term finance to (a) an enterprise or undertaking wholly engaged in the business referred to in section 80-IA(4) or 80-IAB(1) of the Income-tax Act, 1961 (as the clause is printed), or (b) an undertaking developing and building a housing project referred to in section 80-IB(10) of that Act, a hotel project of not less than three star category as classified by the Central Government, or a hospital project with at least one hundred beds for patients.
- Infrastructure capital fund (56): a fund operating under a trust deed registered under the Registration Act, 1908, set up to raise moneys for investment of that kind.
- Insurer (58): an Indian insurance company as defined in section 2(7A) of the Insurance Act, 1938, granted a certificate of registration under section 3 of that Act.
Clauses (59) to (68): interest, securities, tax and capital gain terms
- Interest (59): interest payable in any manner for moneys borrowed or debt incurred (including a deposit, claim or similar right or obligation), and it includes service fee or any other charges for the moneys borrowed or debt incurred or for any credit facility that has not been utilised.
- Interest on securities (60): interest on any Central or State Government security, and interest on debentures or other securities issued by or for a local authority, a company, or a corporation established by an Act.
- International Financial Services Centre (61): the meaning in section 2(q) of the Special Economic Zones Act, 2005.
- Joint Commissioner (62), Joint Commissioner (Appeals) (63), Joint Director (64): appointees under section 237(1), each including the corresponding Additional office.
- Legal representative (65): the meaning in section 2(11) of the Code of Civil Procedure, 1908.
- Liable to tax (66): for a person and a country, that there is an income-tax liability on the person under that country's law for the time being in force, including a person later exempted from that liability.
- Long-term capital asset (67) is a capital asset that is not a short-term capital asset; long-term capital gain (68) is the gain from the transfer of a long-term capital asset. The short-term test is in clause (101), covered in a later article on section 2.
Clauses (69) to (76): manufacture, rate, residence and PAN
- Manufacture (69): a change in a non-living physical object, article or thing resulting in a new and distinct object with a different name, character and use, or bringing into existence a new and distinct object with a different chemical composition or integral structure.
- Maximum marginal rate (70): the rate of income-tax (including surcharge) applicable to the highest slab of income for an individual, association of persons or body of individuals, as specified in the Finance Act of the relevant year. The text states no rate.
- Non-banking financial company (71): the meaning in section 45-I(f) of the Reserve Bank of India Act, 1934.
- Non-resident (72): a person who is not a "resident", and for sections 161, 174 and 312 includes a person who is not ordinarily resident as per section 6(13).- Notification (73): one published in the Official Gazette; "notify" is read accordingly.
- Partner (74) and partnership (75): the meaning in section 4 of the Indian Partnership Act, 1932; a partner includes a minor admitted to the benefits of partnership and a partner of a limited liability partnership, and a partnership includes a limited liability partnership. The text prints the Limited Liability Partnership Act, 2008 as "(6 of 2009)".
- Permanent Account Number (76): a unique number of ten alphanumeric characters allotted by the Assessing Officer to a person for identification under the Act, including a number allotted under the new series.
The other Acts named above are separate laws; check each for its own terms.
Need help with classifying receipts as income?
Subsidies, winnings, allowances and benefits from a company can all be "income" under this clause even when they do not look like a salary or a sale. To make sure a return reports them correctly, see our income tax return filing service.
Key takeaways
- "Income" includes 23 listed limbs (a) to (w), including winnings, perquisites, capital gains and government subsidies other than the two exceptions in limb (w).
- "India" extends to maritime zones, the continental shelf and the air space.
- "Interest" includes service fee and charges on an unutilised credit facility.
- "Maximum marginal rate" is whatever the Finance Act of the relevant year specifies.
- A PAN has ten alphanumeric characters.
- Notified standards and notified items are not in the text consulted.
Read next
- Section 2: dividend, fair market value, firm and foreign company (clauses 36 to 48)
- Section 2: person, principal officer, rates in force, relative and resident (clauses 77 to 100)
- Section 92: income from other sources
- Section 6: residential status
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.