Section 2 — Definitions. Successor to -----, s.2, s.2(1), s.2(10), s.2(11), s.2(12), s.2(12A), s.2(13), s.2(13A), s.2(14), s.2(15), s.2(15A), s.2(15B), s.2(16), s.2(16A), s.2(17), s.2(18), s.2(19), s.2(19A), s.2(19AA), s.2(19AAA), s.2(19C), s.2(1A), s.2(1B), s.2(1C), s.2(1D), s.2(2), s.2(20), s.2(21), s.2(22), s.2(22A), s.2(22AA), s.2(22AAA), s.2(22B), s.2(23)(i), s.2(23)(ii), s.2(23)(iii), s.2(23A), s.2(23C), s.2(24), s.2(25), s.2(25A), s.2(26), s.2(26A), s.2(26B), s.2(28), s.2(28A), s.2(28B), s.2(28BB), s.2(28C), s.2(28CA), s.2(28D), s.2(29), s.2(29A), s.2(29AA), s.2(29B), s.2(29BA), s.2(29C), s.2(30), s.2(31), s.2(32), s.2(33), s.2(34A), s.2(34B), s.2(34C), s.2(34D), s.2(35), s.2(36), s.2(36A), s.2(37), s.2(37A), s.2(38), s.2(4), s.2(40), s.2(41), s.2(41A), s.2(42), s.2(42A), s.2(42B), s.2(42C), s.2(43), s.2(44), s.2(45), s.2(47), s.2(47A), s.2(48), s.2(5), s.2(6), s.2(7), s.2(7A), s.2(8), s.2(9A), s.2(9B), s.36, s.43, s.43A, s.43B, s.43D, s.44AB, s.44DB, s.45, s.47, s.48, s.49, s.50C, s.54GA, s.55, s.55A, s.56, s.80C, s.80D, s.80DDB, s.80EEA, s.80LA, s.80P, s.80TTB, s.92F, s.94B, s.111A, s.112A, s.115A, s.115AB, s.115ACA, s.115C, s.115JB, s.115JF, s.115VP, s.139, s.139A, s.142A, s.145A, s.194, s.194A, s.194LC, s.196A, s.201, s.206C, s.269SS, s.269ST, s.269T, s.271J, s.281B of the 1961 Act.
Section 2 is in Chapter I — Preliminary, which runs from section 1 to section 3.
Section 2 is the Act's dictionary: a single unnumbered opening line ("In this Act, unless the context otherwise requires") followed by 112 numbered clauses running in alphabetical order of the defined term, from "accountant" in clause (1) to "zero coupon bond" in clause (112). Three kinds of clause sit side by side: one-line pointers that borrow a meaning from another section or another statute (e.g. "prescribed", "firm", "scheduled bank"); designation clauses that tie each rank of officer to an appointment under section 237(1); and a small number of long substantive definitions that carry real operative content and internal Tables of their own — clause (5) "agricultural income", (22) "capital asset", (29) "company in which the public are substantially interested", (35) "demerger", (40) "dividend", (49) "income", (101) "short-term capital asset", (109) "transfer" and (111) "virtual digital asset". The only Table inside the section is in clause (22), fixing the aerial distance from a municipality at which agricultural land stops being outside the capital asset definition. Several clauses end with their own "where,—" block defining sub-terms used only within that clause.
The Act's operative sections are drafted on the assumption that a shared vocabulary already exists, so section 2 supplies it once and centrally rather than repeating it. The opening words "unless the context otherwise requires" make each definition a default that a particular section can displace.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Holding period below which a capital asset is short-term (general rule) | 24 months | Held immediately preceding the date of transfer; the default for all capital assets not in clause (101)(b) | Clause (101)(a) |
| Holding period below which a capital asset is short-term (listed and specified assets) | 12 months | Only for a security listed on a recognised stock exchange in India, a unit of the Unit Trust of India, a unit of an equity-oriented fund, or a zero-coupon bond | Clause (101)(b) |
| Voting power that must be unconditionally allotted to or acquired by the specified holders for a company to be one in which the public are substantially interested | Not less than 50% | Of equity shares carrying voting power, other than shares entitled to a fixed rate of dividend | Clause (29) |
| The same voting-power threshold for a company engaged in generation or distribution of electricity or any other form of power | Not less than 40% | Read in substitution for "not less than 50%" for such companies only | Clause (29) |
| Shareholders of the amalgamating company who must become shareholders of the amalgamated company | Not less than three-fourths in value of the shares | Excluding shares already held by, or by a nominee for, the amalgamated company or its subsidiary immediately before the amalgamation | Clause (6) |
| Shareholders of the demerged company who must become shareholders of the resulting company | Not less than three-fourths in value of the shares | Excluding shares already held by, or by a nominee for, the resulting company or its subsidiary; and otherwise than by acquisition of the demerged company's property or assets | Clause (35) |
| Voting power making a person one who has a substantial interest in a company | Not less than 20% | Beneficial ownership of shares carrying that voting power, not being shares entitled to a fixed rate of dividend | Clause (79) |
| Entitlement making a person substantially interested in a concern other than a company | Not less than 20% of the income of the concern | Beneficial entitlement at any time during the tax year; used in the deemed dividend limb | Clause (40) |
| Age at which a resident individual is a senior citizen | 60 years | Attained at any time during the relevant tax year, and the individual must be resident in India | Clause (100) |
| Population at or above which a municipality or cantonment board brings agricultural land into the capital asset definition | 10,000 | Population per the last preceding census whose figures were published before the first day of the tax year | Clause (22)(iii)(A) |
| Aerial distance from municipal limits within which agricultural land is a capital asset | 2 km / 6 km / 8 km | 2 km where population is more than 10,000 up to 1,00,000; 6 km where more than 1,00,000 up to 10,00,000; 8 km where more than 10,00,000 — measured aerially | Clause (22)(iii)(B), Table |
| Period of profits of a company that ceases to be one in which the public are substantially interested, included in accumulated profits | 3 successive tax years | Immediately preceding the tax year in which the relevant acquisition took place | Clause (40) |
You rarely read section 2 end to end; you arrive at one clause because an operative section used the term. The clauses that decide outcomes rather than merely label things are (22), (29), (40), (49), (101) and (109) — these carry conditions, exclusions and, in (22), a Table, so read the whole clause including its trailing "where,—" block before relying on the opening words. Where a clause says the meaning is "as assigned to it in" another section or another Act, the answer is not in section 2 at all and you must follow the pointer.
An individual sells agricultural land lying 5 km, measured aerially, from the local limits of a municipality whose last published census population was 4,00,000. Item (A) of clause (22)(iii) does not catch it, because the land is outside the municipal limits, but the Table in item (B) prescribes six kilometres where the population is more than 1,00,000 and up to 10,00,000 — so at 5 km the land sits inside the belt, is a capital asset, and the gain is chargeable; had the same field been 7 km out it would have stayed outside the definition altogether. If she had held it for 20 months, clause (101)(a) would also make it a short-term capital asset, the twelve-month rule in clause (101)(b) being confined to a listed security, a Unit Trust of India unit, an equity-oriented fund unit and a zero-coupon bond.
A taxpayer never meets section 2 as a proceeding of its own; he meets it inside whatever provision is being applied — a capital gains computation in the return, an assessment order that classifies a gain as short-term or land as a capital asset, or a notice signed by an officer whose designation clauses (2), (3) and the like tie back to an appointment under section 237(1).
"short-term capital asset" means a capital asset held by an assessee for not more than twenty-four months immediately preceding the date of its transfer
See the full 1961 to 2025 concordance.
All of them are in the Rules 2026 index.
See every circular and notification on this section, or the circulars index.
See every circular and notification on this section, or the notifications index.