Who is Considered a ‘Person’ in Income Tax?
In Indian tax law, the term “person” has a broader meaning than in general usage. It does not refer only to an individual human being but includes various entities that can be assessed for tax purposes. The idea is that anyone or any entity capable of generating income should be liable to pay tax on it. A “person” can be an individual, a company, a partnership firm, or even an artificial legal entity like a trust or an association of persons. Recognizing this wide definition is essential in determining tax liability, exemptions, filing requirements, and more.
Definition under the Income Tax Act
As per Section 2(31) of the Income Tax Act, 1961, the word “Person” includes the following:
- An Individual
- A Hindu Undivided Family (HUF)
- A Company
- A Firm
- An Association of Persons (AOP) or Body of Individuals (BOI), whether incorporated or not
- A Local Authority
- Every Artificial Juridical Person not falling within any of the above categories
This inclusive definition ensures that all income-generating entities—regardless of their structure—are taxed appropriately. Even entities without legal personality, like trusts or societies, are covered under this definition if they earn income.
Why the Definition of Person Matters
Understanding who qualifies as a “person” under Indian tax law is vital for both taxpayers and tax authorities. The classification determines the applicable tax rates, filing deadlines, deductions, and audit thresholds. For example, an individual and a company are taxed at different rates and follow different compliance rules. Similarly, while an AOP/BOI may have joint income, taxation depends on whether the members share profits equally or unequally. Misinterpreting the status of a person can lead to incorrect filings, penalties, or missed exemptions.
Mnemonic :
Mnemonic to Remember Types of ‘Persons’
🧠 “IF CHALAB” – Sounds like a command but helps you recall the categories:
- I – Individual
- F – Firm
- C – Company
- H – HUF
- A – Association of Persons (AOP)
- L – Local Authority
- AB – Artificial Juridical Person or Body of Individuals (BOI)
