The Finance Bill, 2026 proposes to introduce a clear statutory definition of the term “authorised person” in the Income-tax Act, 2025 to remove ambiguity in determining responsibility for tax compliance in cross-border transactions. Under section 402(27), an “authorised person” is treated as the person responsible for paying in cases where consideration is paid to a non-resident for transfer of a foreign exchange asset. While this term was defined under the Income-tax Act, 1961, its absence in the 2025 Act created interpretational gaps. The amendment aligns the 2025 Act with existing law by adopting the definition of “authorised person” as provided in section 2(c) of the Foreign Exchange Management Act, 1999. Additionally, the Bill expands the definition of “work” under section 402(47) to expressly include supply of manpower, bringing such arrangements within the scope of tax deduction at source. These amendments take effect from 1 April 2026.
Providing definition of “authorised person”
Section 402(27) of the Act provides for definition of “person responsible for paying”. In case of payment to non-resident, for transfer of foreign exchange asset, “authorised person” is the person responsible for paying. The term “authorised person” has been defined in the Income-tax Act, 1961, however, it is not defined in the Income-tax Act, 2025.
1. To align with the provisions of Income-tax Act, 1961, it is proposed to provide definition of “authorized person” as has been provided in the said Act.
2. It is proposed to amend section 402(27) of the Income-tax Act, 2025.
3. This amendment will take effect from 1st April, 2026.
[Clause 78]
Extract of Relevant Clauses of Finance Bill, 2026
Clause 78 of the Bill seeks to amend section 402 of the Income-tax Act, 2025 relating to interpretation for the purposes of Chapter XIX-B.
Clause (27) of the said section provides for the definition of the expression “person responsible for paying”.
Sub-clause (c) of the said clause provides that in case of payment of any sum to a nonresident where such sum represents consideration for the transfer by him of any foreign exchange asset, which is not a short-term capital asset, the authorised person responsible for remitting such sum to the non-resident Indian or for crediting such sum to his Non-resident (External) Account.
It is proposed to amend the said sub-clause to clarify that the term “authorised person” referred to therein shall have the same meaning as assigned to it in clause (c) of section 2 of the Foreign Exchange Management Act, 1999.
Clause (47) of the said section defines the expression “work”.
It is further proposed to amend the said clause so as to include supply of manpower under the ambit of “work” for the applicability of tax deducted at source as per of section 393(1) [Table: Sl. Nos. 6(i) or 6(ii)].
This amendment will take effect from 1st April, 2026.
Extract of Relevant Amendment Proposed by Finance Bill, 2026
78. Amendment of section 402.
In section 402 of the Income-tax Act,––
(a) in clause (27), in sub-clause (c), for the words “authorised person responsible”, the words, brackets, letter and figures “authorised person, referred in clause (c) of section 2 of the Foreign Exchange Management Act, 1999, responsible” shall be substituted;
(b) in clause (47), after sub-clause (e), the following sub-clause shall be inserted, namely: —
“(f) supply of manpower to a person to work under his supervision, control or direction.”.
