The Income Tax Act, 1961 classifies taxpayers, also known as “assesses,” into various types based on their legal status and tax liability. Each type of assesses has different tax rates, exemptions, and filing requirements. Here’s a detailed explanation of the types of assesses under the Income Tax Act, 1961:

1. Individual

• Definition: A single human being, including minors, and senior citizens.
• Tax Rates: Individuals are taxed based on a progressive slab system, where the rate increases with income.
• Categories of Individuals:
  • Resident: A person who satisfies any of the basic conditions to be classified as a resident in India for tax purposes.
  • Non-Resident: A person who does not satisfy any of the conditions to be a resident. Income earned in India is taxed, but foreign income is generally not.
  • Resident but Not Ordinarily Resident (RNOR): An individual who has been a non-resident for 9 out of the last 10 years or has been in India for 729 days or less in the last 7 years. Only income earned in India is taxable.
• Subcategories:
  • Salaried Employees: Individuals earning a salary from an employer.
  • Self-employed: Individuals who work on their own, like freelancers, doctors, and lawyers.
  • Senior Citizens: Individuals above 60 years of age have a higher basic exemption limit.
  • Super Senior Citizens: Individuals above 80 years of age have an even higher basic exemption limit.

2. Hindu Undivided Family (HUF)

• Definition: A family consisting of all persons lineally descended from a common ancestor, including wives and unmarried daughters.
• Tax Treatment: HUF is treated as a separate entity for tax purposes. It has its own PAN and files its own tax return. The income of the HUF is distinct from that of its individual members.
• Karta: The head of the HUF (usually the senior-most male member) manages its affairs and files its tax returns.
• Sources of Income: HUF can have income from various sources like business, investments, or ancestral property.

3. Company

• Definition: A legal entity formed under the Companies Act, either as a domestic company (registered in India) or a foreign company (registered outside India).
• Types of Companies:
  • Domestic Companies: Indian companies are taxed at the rates specified in the Income Tax Act, with special provisions for manufacturing companies, companies opting for concessional tax regimes, etc.
  • Foreign Companies: Foreign companies are taxed at a different rate, usually higher, and only on income sourced from India.
• Tax Rates: The tax rate for domestic companies and foreign companies differs and is subject to various provisions like Minimum Alternate Tax (MAT).
• Concessions: Companies may also avail lower tax rates under new tax regimes (e.g., 22% for domestic companies under Section 115BAA, and 15% for new manufacturing companies under Section 115BAB).

4. Firm

• Definition: A partnership firm formed by two or more persons carrying on a business under the Indian Partnership Act, 1932, or a Limited Liability Partnership (LLP) formed under the Limited Liability Partnership Act, 2008.
• Tax Treatment:
  • Partnership Firms: They are taxed as a separate entity at a flat rate of 30% on their total income.
  • LLPs: Similar to partnership firms, LLPs are taxed at a flat rate of 30%.
• Partner’s Income: Any share of profit received by a partner is exempt from tax since the firm or LLP already pays tax on the profits. However, salary, commission, or interest received by the partners is taxable.

5. Association of Persons (AOP)

• Definition: A body of individuals or persons, coming together to carry out a common purpose or activity (e.g., a joint venture). They do not need to be legally registered as a firm.
• Tax Treatment: An AOP is taxed at the applicable slab rates for individuals or at the maximum marginal rate depending on the type of members.
  • If all members have taxable income: The AOP is taxed at the maximum marginal rate (currently 42.744%).
  • If some members are exempt from tax: The AOP may be taxed at different rates based on the income of its members.
• Members’ Share: The share of income received by members from an AOP is taxable in their hands after the AOP has paid tax.

6. Body of Individuals (BOI)

• Definition: A group of individuals who come together for a common purpose but do not form a partnership firm. It differs from an AOP as it only comprises individuals (and not entities or legal persons).
• Tax Treatment: BOIs are taxed similarly to AOPs, at individual slab rates or maximum marginal rates based on the members’ status.

7. Artificial Juridical Person (AJP)

• Definition: Entities that are not individuals but are recognized by law as a legal entity, such as deities, charitable institutions, and corporations.
• Examples: Charitable organizations, trusts, temples, and societies fall under this category.
• Tax Treatment: AJPs are taxed at the rates specified in the Income Tax Act, usually at flat rates. Some AJPs may be eligible for exemptions or deductions, especially charitable institutions (Section 11 and Section 12).

8. Local Authority

• Definition: Local governing bodies like municipalities, panchayats, and port trusts, which are involved in local administration.
• Tax Treatment: Income from property, business, or any other income earned by a local authority is taxable, but specific exemptions may be available for certain types of income, like public utility services.

9. Trust

• Definition: A trust is an arrangement whereby property (movable or immovable) is held by one party (trustee) for the benefit of another (beneficiary).
• Types:
  • Public Trusts: Trusts established for charitable or religious purposes.
  • Private Trusts: Trusts formed for the benefit of individuals or specific families.
• Tax Treatment:
  • Charitable Trusts: Public charitable trusts may be exempt from tax under Section 11 and Section 12 if they meet certain conditions.
  • Private Trusts: Taxed based on the status of the beneficiaries.

10. Cooperative Society

• Definition: A cooperative society is an organization owned and operated by a group of individuals for their mutual benefit (e.g., housing societies, cooperative banks).
• Tax Treatment: Cooperative societies are taxed at specific rates as per the Income Tax Act, with a basic exemption limit. Profits distributed to members may not be taxed in their hands.

11. Representative Assessee

• Definition: A person who is deemed to be the assessee on behalf of another person (the original assessee). This could include agents or guardians.
• Example: If a minor or non-resident is liable to pay tax, a guardian or agent may act as the representative assessee.
• Tax Treatment: The representative assessee is responsible for filing tax returns and paying taxes on behalf of the original assessee.

Summary of Types of Assesses under the Income Tax Act: