Basic Definitions – Assessee, Deemed Assessee & Assessee-in-Default
Who pays tax? Assessee! But who exactly is an assessee? Let's decode this fundamental term.
Assessee - Section 2(7)
Definition: "Assessee means a person by whom any tax or any other sum of money is payable under this Act."
Simple meaning: Anyone who has to pay tax or any money under Income Tax Act
Key Points
1. Not just who pays tax
- Also includes those who pay interest, penalty, fine
2. Includes past liabilities
- Person who paid tax earlier (for refund cases)
3. Very broad definition
- Covers individuals, companies, HUFs, firms, trusts
Who Can Be an Assessee?
Anyone liable to pay any amount under IT Act:
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Also:
- Trusts
- Association of Persons (AOP)
- Body of Individuals (BOI)
- Local Authority
- Artificial Juridical Person
Examples of Assessee
Example 1: Regular Assessee
Raj earned ₹10 lakh salary
- Tax liability: ₹1,12,000
- Raj is an assessee (liable to pay tax)
Example 2: No Tax But Still Assessee
Priya earned ₹5 lakh salary
- Tax: NIL (below ₹7 lakh rebate)
- But filed return → Still an assessee!
Why? Filed return = Interaction with IT Act → Assessee
Example 3: Only Penalty
Company failed to deduct TDS
- Income tax: NIL
- Penalty: ₹50,000
- Company is assessee (payable under IT Act)
Example 4: Refund Case
Suresh got ₹30,000 excess TDS deducted
- Tax liability: NIL
- Refund claim filed
- Suresh is assessee (to receive refund = party to IT Act)
Deemed Assessee
"Deemed" = Considered as, treated as (even if not actually)
Situation: Person X earns income but tax is paid by person Y
Who is assessee? Both!
- X = Actual assessee (income earned by X)
- Y = Deemed assessee (paying on behalf of X)
Common Scenarios
1. Representative Assessee
Example: Executor of deceased's estate
- Mr. Sharma died in 2022
- Income for FY 2023-24: ₹3 lakh (from his property)
- Son (executor) files return and pays tax
Who is assessee?
- Mr. Sharma (deceased) = Actual assessee (income belongs to him)
- Son = Deemed assessee (Section 159 - represents father)
2. Guardian of Minor
- 10-year-old child owns property, earns rent ₹2 lakh
- Mother (guardian) pays tax
Assessee:
- Child = Actual assessee
- Mother = Deemed assessee (Section 160)
3. Agent of Non-Resident
- US company has India office
- India office authorized to pay tax
Assessee:
- US company = Actual assessee
- India office = Deemed assessee (Section 163)
Assessee-in-Default
Serious category!
Definition: Person who fails to comply with IT Act provisions
Common violations:
1. TDS Not Deducted (Section 201)
Example:
- ABC Ltd paid ₹10 lakh salary to employees
- Should deduct TDS ₹1.5 lakh
- Did not deduct → Assessee-in-default
Consequences:
- Pay the TDS amount (₹1.5 lakh)
- Interest @ 1% per month
- Penalty = TDS amount (₹1.5 lakh)
2. TDS Deducted But Not Deposited (Section 201)
Example:
- XYZ Company deducted ₹50,000 TDS from contractor
- Did not deposit to government
- → Assessee-in-default
Consequences:
- Criminal offense! (Misappropriation)
- Interest + penalty + prosecution possible
3. Advance Tax Not Paid (Section 221)
Example:
- Business owner must pay ₹2 lakh advance tax
- Failed to pay by due date
- → Assessee-in-default
Consequences:
- Interest @ 1% per month
4. Incorrect TDS Certificate (Section 206A)
Example:
- Employer issued wrong Form 16
- Inflated deductions shown
- → Assessee-in-default
Penalty: ₹10,000 to ₹1,00,000
Comparison Table
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Multiple Identities Possible
A person can be:
Example - Employer:
- Assessee: Pays own income tax on profits
- Deemed assessee: Represents employees (files TDS returns)
- May become assessee-in-default: If TDS not deposited
All three roles simultaneously!
Real-World Example
Tech Solutions Pvt Ltd:
As Assessee:
- Earns ₹1 crore profit
- Pays ₹30 lakh corporate tax
- ✅ Assessee
As Deemed Assessee:
- Has 50 employees
- Deducts & deposits TDS ₹10 lakh
- ✅ Deemed assessee (representing employees)
As Assessee-in-Default (if violated):
- Forgot to deduct TDS on ₹5 lakh rent payment
- → ⚠️ Assessee-in-default
- Penalty: ₹5 lakh (TDS amount) + interest
Summary
- Assessee (Section 2(7)): Anyone liable to pay tax/interest/penalty under IT Act - very broad term
- Deemed Assessee: Pays tax on behalf of another (guardian, executor, agent) - representative role
- Assessee-in-Default: Failed to comply (TDS not deducted/deposited, advance tax not paid) - violator
- Examples: Individual taxpayer (assessee), mother paying child's tax (deemed), company not depositing TDS (default)
- Consequences: Default → Interest + Penalty + possible prosecution
- Multiple roles: Same person can be all three simultaneously
Quiz Time! 🎯
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Next Chapter: Person – Taxable Entities under Income Tax Act! 👥