Section 402 — Interpretation. Successor to s.192, s.194, s.194A, s.194B, s.194BA, s.194C, s.194H, s.194J, s.194K, s.194LA, s.194LBB, s.194LBC, s.194LC, s.194M, s.194P, s.194Q, s.194R, s.196A, s.197A, s.200A, s.204, s.206C, s.206CB of the 1961 Act.
Section 402 is in Chapter XIX — Collection and Recovery of Tax, which runs from section 390 to section 430.
The section defines forty-seven expressions for the purposes of the Chapter on collection and recovery of tax. It creates no charge; every clause feeds the deduction and collection provisions, chiefly sections 392, 393 and 394.
Several clauses fix who is covered by an obligation. Clause (6) defines "buyer" through a Table: for purchase of goods under section 393(1) [Table: Sl. No. 8(ii)], a person whose total sales, gross receipts or turnover from business exceeded ten crore rupees in the immediately preceding tax year, excluding any person the Central Government may notify; for a sale of goods under section 394(1) (Table: Sl. Nos. 1 to 5), a person obtaining goods by auction, tender or otherwise or the right to receive them, excluding a public sector company, the Central or a State Government and listed foreign missions, a club, and a retail buyer purchasing for personal consumption; for a motor vehicle or other goods under section 394(1) (Table: Sl. No. 6), with its own exclusions including a local authority and a public sector company carrying passengers; and for a Liberalised Remittance Scheme remittance and an overseas tour programme package. Clause (11) defines "designated person" for section 393(1) [Table: Sl. No. 6(i)] by a list of eleven institutional categories and, in sub-clause (l), an individual, Hindu undivided family, association of persons or body of individuals outside those categories whose turnover exceeded one crore rupees in business or fifty lakh rupees in profession in the immediately preceding tax year. Clause (33) defines "seller" for section 394(1) (Table: Sl. Nos. 1 to 6) as a Government, a local authority, corporation or statutory authority, a company, firm or co-operative society, or an individual or Hindu undivided family crossing the same turnover figures, and for section 394(1) (Table: Sl. No. 8) as a person selling an overseas tour programme package. Clause (37) defines "specified person" as any person other than an individual or Hindu undivided family, or such an individual or family crossing those same figures.
Other clauses define what is paid or received. "Commission or brokerage" covers payments to a person acting on behalf of another for services other than professional services, for services in the course of buying or selling goods, or in relation to a transaction in an asset, valuable article or thing, not being securities. "Rent" covers payment under any lease, sub-lease, tenancy or other arrangement for the use of land, building, land appurtenant to a building, machinery, plant, equipment, furniture or fittings, whether or not owned by the payee, with the qualification that for section 393(1) [Table: Sl. No. 2(i)] only payments referable to land, building and land appurtenant to a building are rent. "Work" includes advertising, broadcasting and telecasting, carriage of goods or passengers other than by railways, catering, and manufacturing or supplying a product to a customer's specification using material purchased from that customer or its associate, but not where the material is bought from anyone else and not a sum referred to in section 393(1) [Table: Sl. No. 6(iii)]; clause (47)(f), supply of manpower to a person to work under his supervision, control or direction, was inserted by Act No. 4 of 2026 with effect from 1 April 2026. "Professional services" lists the legal, medical, engineering, architectural, accountancy, technical consultancy, interior decoration and advertising professions and such other profession as the Board may notify. "Consideration for transfer of any immovable property" is expanded to include club membership, car parking, electricity or water facility, maintenance and advance fees and similar incidental charges; "immovable property" is any land other than agricultural land, or any building or part of one; "contract" includes a sub-contract; and "scrap" is waste and scrap from manufacture or mechanical working of materials that is definitely not usable as such.
Clause (27) identifies the "person responsible for paying" separately for salaries, interest on securities, sums payable to a non-resident Indian on transfer of a foreign exchange asset that is not a short-term capital asset, information relating to payments to a non-resident or foreign company, any other chargeable sum, sums paid by or on behalf of a Government where it is the drawing and disbursing officer or other responsible person, and a person not resident in India, where it is the person himself, a person authorised by him, or his agent in India including a person treated as an agent under section 306. In clause (27)(c) the words "authorised person, referred in clause (c) of section 2 of the Foreign Exchange Management Act, 1999 (42 of 1999), responsible" were substituted for "authorised person responsible" by Act No. 4 of 2026 with effect from 1 April 2026.
The remaining clauses define the electronic commerce and gaming vocabulary — "electronic commerce", "e-commerce operator", "e-commerce participant", "online gaming intermediary", "user" and "user account" — the financial vocabulary of "authorised dealer", "banking company", "specified bank", "securities", "time deposits", "Offshore Banking Unit" and "foreign exchange asset", the Unit Trust of India terms, the parking lot, toll plaza, mine and quarry terms "licensee or lessee" and "licensor or lessor", "agricultural land", "an incorrect claim apparent from any information in the statement", "overseas tour programme package", "specified senior citizen" — a resident individual of seventy-five years or more at any time during the tax year, having pension income and no other income except interest from an account in the same specified bank that pays his pension, who has furnished the prescribed declaration — "University" for section 392(4), and a series of clauses borrowing meanings from elsewhere in the Act, including "fees for technical services" and "royalty" from section 9, "goods carriage" from section 58(11)(d), "Foreign Institutional Investor" from section 210(6)(a), "investor" from section 221(6)(a), "non-resident Indian" from section 212(d), "unit" from section 224(10)(c), "special purpose vehicle" from Schedule V (Note 2), and "computer resource", "internet" and "online game" from section 194(2).
Tax deduction and collection work by imposing a duty on a payer or a seller, so the Chapter has to say precisely who bears the duty, on what payment, and to whom. Almost every dispute about a deduction default turns on one of those questions, and this section answers all of them in one place. The turnover figures keep small payers outside the machinery, and the inclusive definitions of "work", "rent", "commission or brokerage" and "consideration for transfer of any immovable property" stop a payment escaping by being labelled something else.
| What | Figure | The condition on it | Where |
|---|---|---|---|
| Turnover that makes a person a buyer for the purchase of goods provision | Exceeding ten crore rupees | Total sales, gross receipts or turnover from the business carried on by him during the tax year immediately preceding the tax year in which the purchase is carried out; for section 393(1) [Table: Sl. No. 8(ii)] | Clause (6), Table Sl. No. 1, column C |
| Turnover that makes an individual, Hindu undivided family, association of persons or body of individuals a designated person | Exceeding one crore rupees in case of business or fifty lakh rupees in case of profession | During the tax year immediately preceding the tax year in which the sum is credited or paid to the contractor; only for a person not falling in the preceding institutional sub-clauses | Clause (11)(l)(ii) |
| Turnover that makes an individual or Hindu undivided family a seller | Exceeding one crore rupees in case of business or fifty lakh rupees in case of profession | During the tax year immediately preceding the tax year in which the goods of the nature specified in section 394(1) (Table: Sl. Nos. 1 to 6) are sold | Clause (33)(a)(v) |
| Turnover that makes an individual or Hindu undivided family a specified person | Exceeding one crore rupees in case of business or fifty lakh rupees in case of profession | During the tax year immediately preceding the tax year in which the income or sum is credited or paid; any person other than an individual or Hindu undivided family is a specified person without a turnover test | Clause (37)(b) |
| Age for a specified senior citizen | Seventy-five years or more | At any time during the tax year, for a resident individual having pension income and no other income except interest from an account in the same specified bank paying the pension, who has furnished the prescribed declaration | Clause (39)(a) |
| Shareholding threshold in the associate test for "work" | As provided in section 36(3) | An associate is a person placed similarly in relation to the customer as the person is placed in relation to the assessee under section 36(3); the section does not itself state a percentage | Clause (47)(e)(ii) |
Whether a payer has to deduct at all is usually decided here rather than in the charging provision. An individual or Hindu undivided family is outside the contractor and general deduction provisions unless the preceding year's turnover exceeded one crore rupees in business or fifty lakh rupees in profession, and the test is on the immediately preceding tax year, so a business that has just grown does not become liable mid-year; every other kind of person is a specified person under clause (37)(a) with no turnover test. The definitions of "work", "rent" and "commission or brokerage" are wider than their ordinary meanings and each carries an internal qualification: "rent" covers machinery, plant, equipment, furniture and fittings, but only land, building and land appurtenant to a building count for section 393(1) [Table: Sl. No. 2(i)]; "work" turns on whose material is used; and "commission or brokerage" excludes professional services and transactions in securities. Two changes by Act No. 4 of 2026 with effect from 1 April 2026 matter: clause (47)(f) was inserted, making supply of manpower to work under a person's supervision, control or direction "work"; and clause (27)(c) was recast to identify the person responsible for paying a non-resident Indian on transfer of a foreign exchange asset as the authorised person referred to in clause (c) of section 2 of the Foreign Exchange Management Act, 1999.
An individual carrying on business had turnover of Rs. 90 lakh in the immediately preceding tax year and pays Rs. 12 lakh to a contractor in the current year. He is not a designated person under clause (11)(l), because his turnover did not exceed one crore rupees in that preceding year, so the contractor payment provision does not reach him — and the fact that his turnover this year is Rs. 2 crore does not change it. If instead a company pays Rs. 12 lakh for the supply of manpower to work under its supervision and control, that payment is now "work" by virtue of clause (47)(f), inserted by Act No. 4 of 2026 with effect from 1 April 2026.
A taxpayer never receives a notice under this section. It is met in defending or framing one under sections 392 to 394 — in an order treating a person as in default for failing to deduct, or a demand for tax not collected — where the answer is usually that the payer was not a designated person, seller or specified person on the preceding year's turnover, or that the payment was not "work", "rent" or "commission or brokerage" as defined here.
exceeding one crore rupees in case of business or fifty lakh rupees in case of profession during the tax year immediately preceding the tax year in which such sum is credited or paid to the account of the contractor
A person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the tax year immediately preceding the tax year in which the purchase of goods is carried out.
supply of manpower to a person to work under his supervision, control or direction.
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.
