Section 402 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.
Section 402 is the interpretation section of Chapter XIX. It gives the meaning of forty-seven terms "for the purposes of this Chapter", and the Tables in sections 393 and 394 depend on them. This article covers clauses (1) to (26), alphabetical from "Administrator" to "overseas tour programme package". Clauses (27) to (47) are in our second article on section 402. The text is read as per the Income-tax Act, 2025 as amended by the Finance Act, 2026. If you need these thresholds applied to your own payments, see our TDS compliance service.
The definitions in clauses (1) to (26) decide who is a buyer (turnover above ten crore rupees in the preceding tax year, with listed exclusions), who is a designated person for contractor payments (a long list, ending with individuals and Hindu undivided families above one crore rupees of business turnover or fifty lakh rupees of professional receipts), and what counts as commission or brokerage, immovable property consideration and an overseas tour programme package. Section 402 was amended by section 90 of the Finance Act, 2026.
Where these definitions apply
Section 402 opens with the words "For the purposes of this Chapter". The definitions apply across Chapter XIX, including the Tables of section 393 (deduction) and 394 (collection). A term used in a Table row should be read with the definition here before applying the row. For the Tables, see our post on section 393. Where a definition sends the reader to another section or another Act, the cross-reference is given below as printed; the other provision is not explained here. Where the Act refers to another law, the reader should check that law.
Clauses (1) to (5): administrator, agricultural land, incorrect claim, authorised dealer, banking company
| Clause | Term | Meaning |
|---|---|---|
| (1) | Administrator | As in section 2(a) of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002) |
| (2) | Agricultural land | Agricultural land in India, (a) not situated in an area referred to in section 2(22)(iii), for section 393(1) (Table: serial number 3(i)); (b) including land situated in such an area, for section 393(1) (Table: serial number 3(iii)) |
| (3) | An incorrect claim apparent from any information in the statement | A claim, on the basis of an entry in the statement, (a) of an item inconsistent with another entry of the same or another item in the statement; (b) in respect of the rate of deduction or collection where the rate is not as per the Act |
| (4) | Authorised dealer | A person authorised by the Reserve Bank of India under section 10(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) to deal in foreign exchange or foreign security |
| (5) | Banking company | A banking company to which the Banking Regulation Act, 1949 (10 of 1949) applies |
Clause (3) gives content to the processing power in section 399(1)(a)(ii): the correction of "an incorrect claim apparent from any information in the statement" is limited to the two situations in clause (3). Our article on sections 396, 399, 400 and 401 covers the processing steps.
Clause (6): who is a "buyer"
For the provisions in column B of the Table, a buyer means a person specified in column C but not a person in column D.
| Serial number | Provision (column B) | Person (column C) | Not included (column D) |
|---|---|---|---|
| 1 | Purchase of goods under section 393(1) (Table: serial number 8(ii)) | A person whose total sales, gross receipts or turnover from the business carried on exceed ten crore rupees during the tax year immediately preceding the tax year of the purchase | Any person the Central Government may notify, subject to conditions |
| 2 | Sale of goods under section 394(1) (Table: serial numbers 1 to 5) | A person who obtains, in any sale by auction, tender or any other mode, goods of the nature in those serial numbers, or the right to receive such goods | (a) a public sector company; (b) the Central or a State Government, an embassy, High Commission, legation, commission, consulate or trade representation of a foreign State; (c) a club; (d) a buyer in the retail sale of such goods purchased for personal consumption |
| 3 | Sale of motor vehicle or other goods under section 394(1) (Table: serial number 6) | A person who obtains in any sale goods of the nature in that serial number | (a) a person in serial number 2, column D(b); (b) a local authority as defined in Schedule III (Table: serial number 22); (c) a public sector company engaged in the business of carrying passengers |
| 4 | Remittance under the Liberalised Remittance Scheme under section 394(1) (Table: serial number 7) | A person remitting an amount under that Scheme of the Reserve Bank of India | (a) a person under serial number 2, column D(a) or serial number 3, column D(b); (b) any other person the Central Government may notify, subject to conditions |
| 5 | Sale of overseas tour programme package under section 394(1) (Table: serial number 8) | A person who purchases an overseas tour programme package | A person under serial number 4, column D |
Which persons the Central Government has notified in serial numbers 1 and 4 is not in the text consulted.
Example (amounts assumed). Kapoor Textiles had a turnover of Rs. 9 crore in the preceding tax year; Desai Mills had Rs. 12 crore. In serial number 1, only Desai Mills meets the "exceed ten crore rupees" test and so is a buyer for the purchase-of-goods row. Kapoor Textiles does not.
Clauses (7) to (10): commission, computer resource, consideration for property, contract
| Clause | Term | Meaning |
|---|---|---|
| (7) | Commission or brokerage | Includes any payment received or receivable, directly or indirectly, by a person acting on behalf of another person (a) for services rendered (not being professional services); (b) for any services in the course of buying or selling of goods; (c) in relation to any transaction relating to any asset, valuable article or thing, not being securities |
| (8) | Computer resource, internet, online game | As assigned in section 194(2) |
| (9) | Consideration for transfer of any immovable property | Includes all charges of the nature of club membership fee, car parking fee, electricity or water facility fee, maintenance fee, advance fee or any other charges of similar nature incidental to transfer of the property |
| (10) | Contract | Includes sub-contract |
The inclusion in clause (9) matters for the property purchase row. Charges such as parking and maintenance that are incidental to the transfer are part of the consideration, so the amount against which the threshold and tax are worked out is wider than the headline price.
Clause (11): designated person
For section 393(1) (Table: serial number 6(i)), a designated person means any of the following:
- the Central Government or any State Government;
- any local authority;
- any corporation established by or under a Central, State or Provincial Act;
- any company;
- any co-operative society;
- any authority constituted in India by or under any law, engaged in housing accommodation or in planning, development or improvement of cities, towns and villages, or both;
- any society registered under the Societies Registration Act, 1860 (21 of 1860) or a corresponding law;
- any trust;
- a university established or incorporated by or under a Central, State or Provincial Act, and an institution declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956);
- any Government of a foreign State or foreign enterprise, or any association or body established outside India;
- any firm; or
- an individual, Hindu undivided family, association of persons or body of individuals that does not fall under the above and has total sales, gross receipts or turnover from business or profession exceeding one crore rupees (business) or fifty lakh rupees (profession) in the tax year immediately preceding the tax year in which the sum is credited or paid to the contractor's account.
Example (amounts assumed). Rohit, an individual running a shop, had a turnover of Rs. 1.2 crore in the preceding tax year and engages a contractor. He is not within items 1 to 11, but item 12 applies because his turnover exceeds one crore rupees, so he is a designated person. If his turnover had been Rs. 80 lakh, item 12 would not apply.
Clauses (12) to (26): e-commerce and the rest
| Clause | Term | Meaning |
|---|---|---|
| (12) | Electronic commerce | Supply of goods or services, or both, including digital products, over a digital or electronic network |
| (13) | E-commerce operator | A person who owns, operates or manages a digital or electronic facility or platform for electronic commerce |
| (14) | E-commerce participant | A person resident in India selling goods or providing services, or both, including digital products, through such a facility or platform |
| (15) | Fees for technical services | As in section 9(7)(b) |
| (16) | Foreign exchange asset | Any specified asset which the assessee acquired or purchased with, or subscribed to in, convertible foreign exchange |
| (17) | Foreign Institutional Investor | As in section 210(6)(a) |
| (18) | Goods carriage | As in section 58(11)(d) |
| (19) | Immovable property | Any land (other than agricultural land) or any building or part of a building |
| (20) | Investor | As in section 221(6)(a), for section 393(1) (Table: serial number 4(iv)) and section 393(2) (Table: serial number 9) |
| (21) | Licensee or lessee | Any person, other than a public sector company, granted a lease or licence, or who entered into a contract or otherwise received any right or interest in a parking lot, toll plaza, mine or quarry for business use |
| (22) | Licensor or lessor | Any person who grants a lease or licence, or enters into a contract or otherwise transfers any right or interest in a parking lot, toll plaza, mine or quarry, other than a public sector company, for business use |
| (23) | Non-resident Indian | As in section 212(d) |
| (24) | Offshore Banking Unit | As in section 2(u) of the Special Economic Zones Act, 2005 (28 of 2005) |
| (25) | Online gaming intermediary | An intermediary who offers one or more online games |
| (26) | Overseas tour programme package | Any tour package offering a visit to any country or territory outside India, including expenses for travel, hotel stay, boarding, lodging or any other similar expenditure or in relation thereto |
Clauses (1), (4), (5), (24) and others name other Acts; check those Acts for the meanings carried by their own terms. Clause (2) is the only definition in this range that changes its content depending on the Table row (serial number 3(i) or 3(iii)).
Reading note
A footnote printed beside clause (4) in the copy quotes old text of a different provision, namely section 400(2); it is not part of section 402. Section 402 as a whole was amended by section 90 of the Finance Act, 2026.
Need help with TDS and TCS definitions?
Whether a payer is a "buyer", a "designated person" or a "specified person" decides whether a Table row applies at all. Our TDS compliance team checks these thresholds payer by payer, so that deduction and collection are made where the Act requires them and not where it does not.
Key takeaways
- Section 402 gives forty-seven meanings; clauses (1) to (26) are covered here.
- A buyer for purchase of goods must have turnover above ten crore rupees in the preceding tax year.
- Clause (6) excludes persons such as public sector companies, clubs and retail personal-consumption buyers for sale-of-goods rows.
- A designated person includes governments, companies, firms, trusts and others, and individuals above one crore rupees (business) or fifty lakh rupees (profession).
- Consideration for immovable property includes parking, maintenance and similar incidental charges.
- Section 402 was amended by section 90 of the Finance Act, 2026.
Read next
- Section 402 (clauses 27 to 47): person responsible for paying, rent, seller and work
- Section 397: compliance and reporting
- Section 393: the single TDS section
- Chapter XIX: collection and recovery of tax
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.