As per the definition under section 2 of the Income Tax Act 1961, "assessee" means a person who is liable to pay the tax or any other sum of money (interest, penalty, etc.) on income.
The Income Tax Act categorizes the assessees for the purpose of levying taxes. There are various types of persons in the Act upon whom the tax is levied based on the income earned by them. In this article, we will have a brief understanding of those persons:
Individuals:
- These are human beings who can be a male, female or transgender.
- They can be divided as per the age given below:
- Minors (less than 18 years) where the guardian acts as the assessee.
- Major (18 years or more).
- Senior citizens (60 or more but less than 80 years)
- Super senior citizens ( 80 years or more)
- They can be further categorized into:
- Resident Individual: These individuals are the resident of India.
- Non-resident individuals (NRI's): These individuals are resident of some other country. It is to be noted that there is no age bifurcation for NRI's in the Act.
- A legal representative is regarded as the assessee for a deceased person.
Hindu Undivided Family (HUF):
- It comes from the Hindu law which consists of persons being children of a common ancestor including their wife and unmarried daughters.
- There is no contract required for its formation.
- Even Jain and Sikh families are covered under HUF.
- It is worthy to note that if a daughter obtains a property from the HUF, then, income obtained from that property would be taxable in her hands while in case of sons (married or unmarried), it would be taxable in the hands of HUF.
AOP is an integration of two or more persons formed for attaining a common objective. They could be individuals or entities such as partnership, company or LLP. Example ABZ Limited and PHY LLP are real estate based organizations. They join hands and form an AOP for constructing a residential society.
Body of Individuals (BOI):
The concept of BOI is similar as that of AOP. The only difference here is that this will comprise only living individuals unlike AOP where entities are also a member. Various trusts, NGO's, co-operative societies can be examples of BOI.
Local Authority:
These establishments are legally created by the government mainly for the welfare of the society. Example: Kolkata Municipal Corporation.
Artificial Juridical Person:
These are public corporations established under a special Act of Parliament or Legislature having a separate identity of its own. These could be a profit or non-profit making entities. The Institute of Chartered Accountants of India (ICAI) is an example.
Firm:
It is mainly created to do a profit making business. Registration for a firm is not mandatory. Unlike Artificial Judicial Person, it can merely be formed by an agreement. Usually, it is a partnership entity that provides legal, consulting, accounting and other such professional services. An example of such firm is Ernst & Young LLP.
Company:
It is a legal entity formed to operate a business - commercial or industrial. It has the same legal rights and responsibilities like that of a natural person. It can challenge or can be challenged in the court. It can enter into contracts, borrow/ lend money, own assets, etc. The owners (shareholders) have a limit to the liability up to the extent of their investment. It could be private or a public company with different regulations and financial reporting requirements. Google India Private Limited is an example of a company.
Each of the above mentioned persons have their own income tax regulations. They need to pay taxes as per the rates fixed by the Central Board of Direct Taxes (CBDT) after reliefs and/ or deductions and/ or exemptions, if any.
Disclaimer: These are just basic concepts. However, the applicability of the law shall depend on case to case basis.
Thank you for reading!!
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