Who is an Income Tax Assessee? Understanding the Meaning and Responsibilities

In simple terms, an income tax assessee is any individual, company, or entity that is liable to pay income tax. Understanding the term “income tax assessee” is crucial for anyone earning an income or involved in business activities. This term defines a person or entity that comes under the scope of the Income Tax Act, 1961.

Let us explore the income tax assessee meaning, who qualifies as an assessee, and their responsibilities.

Income tax assessee meaning

An income tax assessee is defined under Section 2(7) of the Income Tax Act, 1961. Simply put, an assessee is a person or a group of people who are required to pay taxes on their income. The Income Tax Act applies to individuals, companies, firms, and other types of entities, so an assessee could be any one of them.

In general, an assessee is responsible for:

• Filing their Income Tax Return (ITR)
• Paying taxes on income or profits earned
• Complying with the rules under the Income Tax Act

Types of assessees

An income tax assessee can be classified into several categories. The classification helps determine the tax liability, filing requirements, and other related matters. Let us look at these categories:

1. Individual assessee:

An individual assessee is a person who earns income through employment, business, investments, or other sources. If the total income exceeds the basic exemption limit, they must file an Income Tax Return.

The exemption limit varies based on age:

• For individuals below 60 years: Rs. 2.5 lakh
• For senior citizens (60-80 years): Rs. 3 lakh
• For super senior citizens (above 80 years): Rs. lakh

2. Hindu Undivided Family (HUF)

A Hindu Undivided Family (HUF) is a separate entity for tax purposes. It can be an assessee if the family’s income exceeds the exemption limit. An HUF is formed by members who are related by birth and follow Hindu laws.

3. Companies and firms

Any company, including private, public, domestic, or foreign, is an assessee under the Income Tax Act. Companies must file their tax returns, and their income is taxed separately from that of individual shareholders.

Similarly, a firm, which can be a partnership or a limited liability partnership (LLP), is also an assessee if it earns taxable income.

4. Association of persons (AOP) and body of individuals (BOI)

An Association of Persons (AOP) and Body of Individuals (BOI) are both considered separate entities under the Income Tax Act. They are treated as assessable units and are liable to pay taxes on their income.

5. Trusts and non-profit organisations

Certain organisations, such as charitable trusts or non-profit organisations, can also be classified as an assessee. These organisations must file tax returns and may be eligible for tax exemptions if they meet specific conditions.

Who becomes an assessee?

Not everyone is automatically considered an income tax assessee. The person or entity must fall under certain criteria.

• Income exceeds exemption limit: If an individual or entity earns income above the exemption limit set by the Income Tax Act, they are required to file a return and pay taxes. This is the primary reason why people are classified as assessees.
• Specific conditions for certain assesses: Apart from individuals, some other groups, such as companies, firms, and trusts, are considered assessees regardless of their income level. For instance, all companies are required to file tax returns even if they do not make a profit.
• Residents with foreign assets: If an Indian resident owns assets or has a financial interest in foreign countries, they must file a return, thus becoming an assessee under the law.

Responsibilities of an income tax assessee

Being an income tax assessee comes with several responsibilities. These responsibilities ensure that individuals, companies, and other entities comply with the Income Tax Act. Let us look at these duties:

• Filing the Income Tax Return (ITR): One of the key responsibilities of an assessee is filing the Income Tax Return by the due date. The return should contain all details about the income earned, deductions claimed, taxes paid, and any other relevant information. The due date for filing ITR varies depending on the type of assessee and the nature of income.
• Paying income tax: The assessee is required to pay the correct amount of income tax. Taxes are generally calculated based on the taxable income after deductions. Payment can be made through advance tax, self-assessment tax, or tax deducted at source (TDS).
• Maintaining proper records: Every assessee must maintain proper records of income and expenses. These records help support the information provided in the Income Tax Return. They are also needed if the tax authorities request an audit or verification.
• Compliance with tax laws: Assessees must comply with all relevant provisions of the Income Tax Act. This includes understanding exemptions, deductions, and other tax rules. Non-compliance can result in penalties, interest charges, or even legal action.
• Responding to tax notices: If the tax authorities send a notice, the assessee must respond to it. Notices may be sent to ask for more information or to clarify any issues with the tax return. Ignoring notices can lead to serious consequences.

Income tax assessee and types of tax returns

There are different types of Income Tax Returns that an assessee may need to file, depending on their income type and source. The Income Tax Department has created different forms (ITR-1, ITR-2, ITR-3, etc.) for various categories of assessees. Let us see the common ones:

• ITR-1 (Sahaj): This form is for individuals who earn income from salary, pension, and other sources like interest. It is the simplest and most commonly used tax return form.
• ITR-2: ITR-2 is for individuals and HUFs who earn income from sources such as house property, capital gains, or foreign income.
• ITR-3: This form is for individuals and HUFs with business or professional income.
• ITR-5: ITR-5 is for firms, LLPs, AOPs, BOIs, and other similar entities.

Each form has its specific guidelines, and the assessee must choose the appropriate one based on their income details.

Tax benefits available to assessees

As an income tax assessee, you are entitled to certain tax benefits that can reduce your taxable income. Some of the common benefits include:

• Deductions under Section 80C: Under Section 80C of the Income Tax Act, you can claim deductions for investments in specified instruments like Public Provident Fund (PPF), National Savings Certificates (NSC), and life insurance premiums, up to a maximum of Rs. 1.5 lakh.
• Home loan deductions: If you are repaying a home loan, you can claim deductions under Section 24(b) for the interest paid (up to Rs. 2 lakh per year). Additionally, under Section 80C, you can claim deductions on the principal repayment (up to Rs. 1.5 lakh). These deductions can significantly reduce your taxable income.
• Deductions for medical insurance (Section 80D): You can claim deductions on premiums paid for medical insurance under Section 80D. The amount varies based on your age and the type of coverage.

How a home loan can benefit you?

As an income tax assessee, one of the best ways to save on taxes is by investing in a home. Home loans not only help you buy a property but also offer attractive tax benefits. The government encourages homeownership by providing deductions on home loan repayments.

If you are planning to purchase a home and need funds, Bajaj Housing Finance Home Loan can offer you low interest rates and convenient repayment terms. By availing of a Bajaj Housing Finance Home Loan, you can take advantage of tax benefits, such as deductions on interest under Section 24(b) and principal repayment under Section 80C, which can lower your taxable income.

Here are a few benefits of opting for a home loan from Bajaj Housing Finance:

1. High loan amount: Secure funding up to Rs. 15 crore* to turn your dream home into reality.

2. Low interest rates: Enjoy interest rates starting 8.25%* p.a, and EMIs as low as Rs. 741/lakh*.

3. Quick approval: Get approved within 48 Hours* of applying – sometimes even sooner.

4. Flexible repayment tenure: Choose a repayment term of up to 32 years for comfortable EMIs.

5. Simple application: Take advantage of doorstep document collection for a smooth process.

6. Balance transfer facility: Move your existing home loan and get a top-up loan with better terms.

Take the first step today—apply for Bajaj Housing Finance Home Loan!