Income Tax 2025

Appearance

Liability of representative assessee. ​

304(1) ​

Every representative assessee, as regards the income in respect of which he is a representative assessee, shall be subject to the same duties, responsibilities and liabilities as if the income were income received by or accruing to or in favour of him beneficially and for this purpose,–

  • (a) the representative assessee shall be liable to assessment and any otherproceedings under this Act, in his own name in respect of that income and any such proceedings shall be deemed to be made upon him in his representative capacity only; and
  • (b) the tax on such income shall, subject to the other provisions contained in this Chapter, be levied upon and recovered from the representative assessee in like manner and to the same extent as it would be leviable upon and recoverable from the person represented by him.

304(2) ​

If any person, in respect of any income is assessable under this Chapter in the capacity of a representative assessee, then he shall not, in respect of that income, be assessed under any other provisions of this Act.

304(3) ​

Irrespective of the provisions of this Chapter, the Assessing Officer may directly assess the person on whose behalf or for whose benefit income therein referred to is receivable, or may recover from such person the tax payable in respect of such income.

304(4) ​

If only part of the income of a trust is chargeable under this Act, then the proportion of income receivable by a beneficiary from such trust derived from the chargeable part shall be determined as follows:— A x C, B Where,— A = the chargeable part of the income of the trust; B = the whole income of the trust; and C = the income receivable by the beneficiary from the trust.

304(5) ​

The Assessing Officer shall have the same remedies in the same manner against all property of any kind vested in or under the control or management of any representative assessee as he would have against the property of any person liable to pay any tax, whether the demand is raised against the representative assessee or against the beneficiary direct.

Explanation

Section Summary: ​

Section 304 of the Income Tax Act deals with the liability of a representative assessee. A representative assessee is someone who manages or receives income on behalf of another person, such as a trustee, executor, or agent. This section clarifies that the representative assessee is responsible for the tax obligations related to the income they manage, as if it were their own income. It also outlines the rights and remedies available to the tax authorities in recovering taxes from the representative assessee or the beneficiary directly.

Key Changes: ​

  1. Clarification of Representative Assessee's Liability: The section explicitly states that a representative assessee is subject to the same duties, responsibilities, and liabilities as if the income were their own. This ensures clarity in tax treatment for income managed by representatives.
  2. Direct Assessment of Beneficiary: The Assessing Officer has the authority to assess or recover taxes directly from the beneficiary, bypassing the representative assessee if necessary.
  3. Proportional Taxation for Trusts: A formula is introduced to determine the taxable portion of income received by a beneficiary from a trust, ensuring only the chargeable part of the trust's income is taxed.

Practical Implications: ​

  1. For Representative Assessees: Trustees, executors, or agents must ensure proper compliance with tax laws, as they are liable for the income they manage. They must file returns and pay taxes on behalf of the beneficiaries.
  2. For Beneficiaries: Beneficiaries of trusts or estates may still be directly assessed for taxes if the Assessing Officer chooses to bypass the representative assessee.
  3. For Trusts: Trusts with both taxable and non-taxable income must calculate the proportion of income chargeable to tax for each beneficiary using the prescribed formula.

Critical Concepts: ​

  1. Representative Assessee: A person who manages or receives income on behalf of another, such as a trustee, executor, or agent.
  2. Chargeable Income: The portion of income that is subject to tax under the Income Tax Act.
  3. Formula for Trust Income Allocation:
    • A: Chargeable part of the trust's income.
    • B: Total income of the trust.
    • C: Income receivable by the beneficiary.
    • The taxable portion for the beneficiary = (A x C) / B.

Compliance Steps: ​

  1. For Representative Assessees:
    • File income tax returns in their own name for the income they manage.
    • Maintain proper records of income and expenses related to the represented person or entity.
    • Pay taxes on the income as if it were their own.
  2. For Trusts:
    • Calculate the chargeable portion of income using the formula provided.
    • Allocate the taxable income to beneficiaries accordingly.
  3. For Beneficiaries:
    • Be prepared for potential direct assessment by the tax authorities.

Examples: ​

  1. Trust Income Allocation:

    • A trust has a total income of ₹10 lakh (B), out of which ₹6 lakh (A) is chargeable to tax.
    • A beneficiary receives ₹2 lakh (C) from the trust.
    • The taxable portion for the beneficiary = (6,00,000 x 2,00,000) / 10,00,000 = ₹1,20,000.
    • The beneficiary will be taxed on ₹1,20,000.

  2. Direct Assessment of Beneficiary:

    • A trustee fails to pay taxes on income managed for a beneficiary.
    • The Assessing Officer can directly assess the beneficiary for the tax liability, bypassing the trustee.

This section ensures that income managed by representatives is properly taxed, and the tax authorities have flexibility in recovering taxes from either the representative or the beneficiary.