It is mandatory for every person to pay Income-tax. Income tax law defines the term ‘person’1 to include:
- Individual. For example, a salaried employee etc.
- Hindu Undivided Families (HUF). For example, a HUF including the joint family of Mr Rakesh, Mrs Rakesh and their sons pays tax as a separate entity.
- Association of persons or body of individuals. For example, a housing cooperative society.
- Firms. For example, a firm called TaxMann & Co-owned by Mr Rakesh and Mrs Rakesh.
- LLPs. For example, ABC LLP. In an LLP, each partner is not responsible or liable for another partner’s misconduct or negligence.
- Companies. For example, ABC Ltd., XYZ Ltd.
- Local authority and any artificial juridical person not covered under any of the above. For example, University and Institutions, Municipal Corporations, etc.
Thus, from the definition of the term ‘person’, it can be observed that, apart from a natural person, i.e., an individual, other artificial entities like a company, HUF, etc. are liable to pay Income-tax. All association of persons, body of individuals, local authority, artificial juridical person will have to pay income tax even if they were formed with or without the objective of earning a profit, or income. 2 However, certain institutions or entities in India do not have to pay tax under the law. Read here to find out more.
- Section 2(31), Income Tax Act, 1961
- Exception to Section 2(31), Income Tax Act, 1961