Section 2(7) of the Income Tax Act, 1961 says that an assessee is anyone who is required by the Act to pay tax or any other amount. This includes people or businesses that are being sued or who are thought to be tax-liable. For tax planning and compliance, it's important to know the different types of assessees. The word "assessee" can refer to a lot of different people. It makes sure that all sources of income are taxed correctly based on the type of entity and the income. Taxpayers can better understand the filing requirements if they know the different types of assessees.
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Who is an Assessee under the Income Tax Act, 1961
Part 2(7) of the Income Tax Act, 1961 says that someone is an assessee if they owe tax or any other amount of money (like interest, a penalty, or a fine) under the Act. This broad definition makes sure that it covers everyone who owes taxes or is involved in a tax-related case. The term "person" here is expansive, including individuals, companies, firms and other entities as outlined in Section 2(31).
The full statutory definition includes three key clauses that expand its scope. It encompasses not just direct taxpayers but also those deemed liable or in default. This definition has remained largely unchanged as of 2025 with no significant amendments altering its core meaning.
Key Components Assessee
The definition under Section 2(7) breaks down into the following parts for clarity. These components make the definition inclusive, covering active taxpayers, representatives and defaulters
Primary Liability: A person who is required to pay any tax or other sums under the Act, such as on their income exceeding the exemption limit. This forms the basic category of an assessee.
Clause (a) - Persons in Proceedings: Every person against whom any proceeding under the Act has been initiated for assessing income, losses or refunds. This includes assessments for their own income or that of others they are responsible for.
Clause (b) - Deemed Assessee: Any person who is treated as an assessee under specific provisions of the Act, such as executors of estates or legal representatives. This ensures continuity in tax obligations.
Clause (c) - Assessee in Default: Persons deemed in default for failing to comply, like not deducting TDS or paying advance tax. They face penalties and recovery actions.
Classification of Types of Assessee
The types of assessee can be classified in two primary ways: based on the definition of "person" under Section 2(31) and based on their assessment status. This dual classification allows for a comprehensive view of tax liabilities. Exploring these types of assessee reveals how the Act applies to different entities.
Types of Assessee Based on "Person": The types of assessee include natural persons (individuals, HUFs) and artificial entities (companies, firms, AOPs/BOIs, local authorities, artificial juridical persons) as defined under Section 2(31) of the Income Tax Act, 1961.
Assessment-Based Types of Assessee: The types of assessee based on assessment status focus on roles like normal (direct liability), representative (acting for others), deemed (statutory liability) and assessee-in-default (non-compliance), addressing procedural tax obligations.
Read about Income Tax Act Rules.
Types of Assessee Based on Definition of Person
Under Section 2(31), a "person" includes seven categories and each forms a distinct types of assessee. These types of assessee cover individuals to organizations. This classification ensures inclusive taxation.
1. Individual
An individual is a single natural person, such as a salaried employee or freelancer. Individuals are taxed on personal income from various sources. Residential status further influences their tax liability.
For example
A software engineer earning salary and freelance income.
A senior citizen receiving pension and interest from savings.
2. Hindu Undivided Family (HUF)
An HUF (Hindu Undivided Family) consist of Hindus, Buddhists, Jains and Sikhs and are treated as a separate entity. It owns ancestral property and is taxed on collective income where the karta manages its affairs. HUFs benefit from separate deductions and exemptions. Income from joint family assets is clubbed under this entity. This makes HUFs one of the unique types of assessee in Indian tax law.
3. Company
Any incorporated entity, whether private, public, domestic or foreign, falls under this category. Companies are taxed at a flat rate on profits. They must comply with corporate tax rules and filings.
Examples include
Private limited companies like startups.
Public listed firms on stock exchanges.
Foreign companies operating in India.
This is one of the most regulated types of assessee due to complex compliance.
4. Firm
Partnerships, including limited liability partnerships (LLPs), are treated as firms. They are taxed on business income shared among partners. Firms can deduct interest and remuneration to partners.
A firm differs from a company in structure and liability. Partners' shares determine tax distribution. This category highlights partnership-based types of assessee.
5. Association of Persons (AOP) or Body of Individuals (BOI)
An AOP is a group formed for a common purpose, like a cooperative society, without a formal agreement. A BOI is similar but consists of individuals only. Both are taxed as separate entities if income is shared.
For instance
A group investing in real estate jointly.
Co-owners of property earning rental income.
These types of assessee apply when no other category fits.
6. Local Authority
Municipal corporations, panchayats or similar bodies are local authorities. They are taxed on income from services like water supply or property. Exemptions apply to certain public functions.
Local authorities focus on community services. Their tax treatment ensures fiscal accountability. This is a specialized among the types of assessee.
7. Artificial Juridical Person
Entities not falling under other categories, like trusts, deities or universities, are artificial juridical persons. They are taxed on income as per trust deeds or statutes. This category covers non-human legal entities.
Examples
Religious trusts managing temple income.
Educational institutions with endowments.
It broadens the scope of types of assessee to include abstract entities.
Read Deductions from House Property under Section 24 of Income Tax Act.
Types of Assessee Based on Assessment Status
Beyond structural classification, types of assessee are also divided by their role in tax proceedings. This includes normal, representative, deemed and default statuses. These types of assessee address specific scenarios in assessment.
1. Normal Assessee
When you have to pay tax on your own income, you are called an assessee. They have to file taxes and be assessed directly. For most types of assessees, this is the case. They include people or businesses whose taxable income is higher than their exemptions. Compliance means filing and paying on time.
2. Representative Assessee
This type acts on behalf of another like a guardian for a minor or an agent for a non-resident. They are responsible for filing returns and paying taxes for the beneficiary. Liability is limited to the represented person's income.
For example
A parent managing a child's investment income.
A legal heir handling a deceased person's estate.
Representative types of assessee ensure taxes are collected even in absentia.
3. Deemed Assessee
Deemed assessees are treated like executors of a will when certain rules are followed. They are responsible if they take care of assets that bring in money. This status comes from the law, not from direct income. It can be used in situations of succession or trust. Income can't get away from being taxed when certain types of assessee are present.
4. Assessee-in-Default
This refers to persons who fail to deduct or pay TDS or default on tax payments. They face penalties and interest. Recovery proceedings are initiated against them.
Examples include
Employers not deducting TDS on salaries.
Buyers defaulting on property tax deductions.
Assessee-in-default is a punitive category among types of assessee.
Residential Status and Its Impact on Types of Assessee
Residential status further modifies the types of assessee especially for individuals and HUFs. It determines the scope of taxable income: global for residents, India-sourced for non-residents. Not ordinarily residents have partial global taxation.
Resident: Liable for tax on worldwide income. This applies if they stay in India for 182 days or more in a year.
Non-Resident: Taxed only on income earned or received in India. Useful for NRIs among types of assessee.
Not Ordinarily Resident: A transitional status with limited global tax. It affects high-mobility individuals.
Summary
The Income Tax Act, 1961 defines an assessee as a tax payer. Different types of assessees exist in ITAA. Individuals, Hindu Undivided Families (HUFs), companies, firms, AOPs, BOIs, local authorities and artificial juridical persons like trusts are examples. Individuals pay income tax. Joint HUFs own ancestral property. Companies pay flat taxes. LLPs and partnerships are firms. AOPs and BOIs are purpose-driven groups. Municipalities and others are local authorities. Assessment types also group assessees. Regular assessees pay taxes. Representative assessees pay for guardians. Legally designated assessees include estate executors. Taxpayers who don't pay or deduct tax are defaulters. Residential status determines income tax for individuals and HUFs. This system ensures equal compliance for all taxpayers.
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Types of Assessee: FAQs
Q1. What are the three types of assessee?
The three main types of assessee are normal assessee, representative assessee and deemed assessee.
Q2. What are the types of assessment in taxation?
Types of assessment include self-assessment (taxpayer calculates tax), regular assessment (by tax authorities), best judgment assessment (based on estimates) and reassessment (for escaped income).
Q3. What are the types of person in tax?
Under Section 2(31), types of person include individual, HUF, company, firm, AOP/BOI, local authority and artificial juridical person, each forming distinct types of assessee.
Q4. What is the difference between deemed and representative assessee?
Deemed types of assessee are statutorily liable, like executors while representatives act voluntarily or by appointment for others.
Q5. Why is understanding types of assessee important?
It helps in correct filing, claiming deductions and avoiding penalties, making tax management efficient for all types of assessee.
