Definition Of Income Under Section 2(24) Of The Income Tax Act, 1961 Is Not Exhaustive But Inclusive – Explain

“It was only for the good of his subjects that he collected taxes from them, just as the Sun draws moisture from the Earth to give it back a thousand fold” – Kalidas in Raghuvansh eulogising KING DALIP.


The collection of revenue has been a matter of conflict for various centuries and ages. Empires which had access to more and more sources of revenue grew stronger and stronger while the empires whose centres of revenue vanished became extinct from the face of the earth. According to a List published by BusinessInsider on its website,  the biggest and the greatest empire which the world has seen was the British Empire.

According to the Journal “The Political Economy of British Expansion Overseas, 1750-1914” written by P. J. Cain and A. G. Hopkins, the collection of revenue was on of the major reasons for the expansion of British Empire. So, we can understand that collection/source of revenue is very important for a Country as well as any other organisation to survive as well as thrive.

History of Taxes in India

In India, the system of Direct Taxation has existed in either one form or the other since ancient times. Both the Manusmriti and the Arthasastra have references in them made to a variety of tax measures.

The Tax, as we know it today, was introduced for the first time by Sir James Wilson. The Indian Income Tax Act of 1860 was enforced to meet the losses sustained by the government on account of the military mutiny of 1857. Currently, Income Tax Act, 1961 is enforced in India to carry out the taxation.

Background and Need for Tax

Paying taxes is considered as a duty of a responsible citizen. Although, it is also a requirement of the law under the Income Tax Act, 1961. So, it is mandatory to do so to prevent litigation. The government agency that oversees taxes is the Internal Revenue Service or IRS will require you to pay your taxes or else face penalties, such as fines or going to jail.

The money provided in the Taxes goes to many places. In addition to paying the salaries of government workers, the tax money also helps to support the need of common resources like water or electricity, police and firefighters.

Tax money helps to ensure the roads you travel on are safe and well-maintained. Taxes fund public libraries and parks. Taxes are also used to fund many types of government programs that help the poor and less fortunate, as well as many schools.

What is ‘Income’?

Simply, Income is any benefit (whether cash or kind) which can be measured in money.

Who is an Assessee?

An assessee is any individual who is liable, defined under Section 2(7) of the Income Tax Act, 1961, to pay tax.

Section 2(24) of Income Tax Act, 1961

Section 2(24), read as Section 2 Clause 24, is the base Clause of Income Tax Act.

Definition of Income According to Income Tax Act, 1961

The definition of Income, as given in the Income Tax Act, starts with the words “income includes”. It gives a statutory definition to income and leaves room for the further extension of the scope of the term, therefore, It gives an Exhaustive definition of the term Income.

Characteristics of Income

1. Regular and definite

A person can get a fixed income at a regular pace or at regular intervals of time but income can also be irregular or indefinite(non-uniform) or both too.

2. Cash/kind

Income can be in the form of Cash or also in any other form which can be measured in money

3. Legal/Illegal

Income can be Legal or Illegal too. This does not affect Income Tax Act or Income Tax Officers as they do not care if the income is legal or illegal, they just want us to pay tax in either of the case.

4. Temporary/Permanent

Income can be permanent as well as temporary.

5. Lump Sum/Investments

A person can get her/his income in a lump sum as well as in the form of investments

6. Real(Not fictious)

The income which a person gets which shall be taxed must be real but not fictitious in nature.

For Example – If a person gets Rs.1,00,000 as income from a company but under a condition, which is that the person has to donate/give the company Rs.40,000 back, the real income of the person, in this case, will be Rs.60,000 only and only this sum of money is liable for taxation.

7. Award/Prize Money

A person can also get an income after winning an award or some type of prize in the form of money. This income is also liable for taxation.

8. Devaluation of Currency

If a person gets income after/due to devaluation of currency, this income is also liable for taxation.

For Example – If a person makes a sale of  $1,000 when the value of $1 = Rs.60 and then suddenly the currency gets devalued to $1 = Rs.100, then this margin/income which will give the person profit is also taxed.

9. Tax-Free Income

A person can also get a tax-free salary/income. For Example – If the employer of a person pays the person Rs.1,00,000 after paying the respective tax, then, the person is not liable to pay tax.

10. Agricultural Income

The income, defined under section 2(1A) of the Income Tax Act, 1961, earned or revenue earned from sources including farming land, buildings on or identified with agricultural land and commercial produce from a horticultural land. This type of income is given an exemption under Section 10(1) of the 1961 Act.

Important Case Laws

1) Commissioner of Income Tax, Poona v/s H.G. Date (1971) 82 ITR 71

In this case, the assessee had his agricultural land on which he grew sugarcane. So, to sell the sugarcane he went to jaggery mill but his production was not bought. Therefore, the assessee used machines by himself to produce jaggery. Later, he claimed for an exemption under ‘agricultural income’. The income received by the assessee from the jaggery he sold was given an exemption and the reasoning given behind so was that the assessee did not have the market to sell.

2) Brihan Maharashtra Sugar Syndicate Ltd v/s Commissioner of Income Tax (1946) 014 ITR 0611

In this case, there was confusion surrounding the acceptance of the sale of our which was manufactured from sugarcane as under the domain of agricultural income. The process is not required to render it fit to be taken to market. It was then held that as sugarcane is marketable without the requirement of them turned into jaggery first they do not come under the domain of agricultural income and hence the sale of sugarcane can not be exempted from tax.

Is Definition of Income under Section 2(24) Inclusive or Exhaustive

The definition of Income under Section 2(24) is inclusive in nature. In the Income Tax Act, 1961 Section 2(24) includes the word ‘income’ from the clause (i) to (xiv). The Hon’ble Supreme Court in the case of E.D. Sasson & Co. Ltd. Vs. CIT (1954) 26 ITR 27 (SC) has said “

” Now what is income? The -term is nowhere defined in the Act…… In the absence of a statutory definition, we must take its ordinary dictionary meaning that which comes in as the periodical produce of one’s work, business, lands or investments (considered in reference to its amount and commonly expressed in terms of money) ”.

We can understand from this that no attempt has been made in the Income Tax Act to define the term “income” except in section 2(6C) of the Income-tax Act, 1922 (which corresponds to section 2(24) of Income-tax Act, 1961) as it includes certain definitions of what possibly can not have been regarded as ‘income’.


Collection of revenue is very important for every state but for that, tax is to be levied on the incomes of the people. But there is no definition of the word ‘income’ given in the Income Tax Act, 1961. The things which are given extent or which should be given more emphasis are given in the clauses of Section 2(24) of the Income Tax Act, 1961. It means that Courts can decide what comes under Income and what not rather than following a list of things which ends after a certain limit of information. Therefore, the definition of the word ‘income’ given in Section 2(24) of the Income Tax Act, 1961 is not exhaustive but, inclusive in nature.


Cain, P. J., and A. G. Hopkins. “The Political Economy of British Expansion Overseas, 1750-1914.” The Economic History Review, vol. 33, no. 4, 1980, pp. 463–490. JSTOR, Accessed 23 Jan. 2021.

This Article is Authored by Anushk, 1st Year BALLB(H) Student at CHRIST(Deemed to be University).

Also Read – What Is Exempted Income? List Out Exempted Income By Proper Classification

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