Who is a ‘Person’ under S. 2(31) of Income Tax Act in India

The Income Tax Act, 1961, is the main law that governs taxation in India for both individuals and organizations. One key concept in this law is the definition of the term person under Section 2(31). This definition is important because it decides who is liable to pay tax, what rates apply, and what rules they must follow.

The term person does not only mean a natural human being. It also includes several other entities, both natural and artificial. Knowing this classification is essential for taxpayers and professionals. This article explains what the law says, the types of persons covered, and how they are taxed, based on the Finance Act, 2025.

Meaning of ‘Person’ Under Section 2(31)

Section 2(31) gives an inclusive definition of person for income tax purposes. Unless the context requires otherwise, a person includes:

• An individual
• A Hindu Undivided Family (HUF)
• A company
• A firm
• An association of persons (AOP) or a body of individuals (BOI), whether incorporated or not
• A local authority
• Every artificial juridical person not covered in the above categories

The law also clarifies that an AOP, BOI, local authority, or artificial juridical person is considered a person even if it was not formed to earn income or profit. This broad definition ensures that all relevant entities fall under the tax net.

Important Note: Limited Liability Partnerships (LLPs) registered under the LLP Act, 2008, are treated as firms for income tax purposes.

Types of Persons Recognized Under the Act

The Act divides persons into different categories. Each category has its own tax rules and obligations.

Individual

Any natural human being is an individual. This includes residents and non-residents. Tax liability depends on residential status under Section 6. Individuals pay tax based on income slabs under the old or new regime (Section 115BAC).

Hindu Undivided Family (HUF)

An HUF is a family unit under Hindu law. It includes all persons descended from a common ancestor, their wives, and unmarried daughters. An HUF is a separate taxable entity and can own property and earn income independently.

Company

A company is a legal entity registered under the Companies Act, 2013, or similar foreign laws. Both private and public companies are taxed on income based on their residential status.

Firm

A firm includes partnerships under the Indian Partnership Act, 1932, and LLPs. Firms are taxed separately from partners. Income is calculated at the firm level before distribution.

Association of Persons (AOP)

An AOP is a group of two or more persons, which can include individuals or entities, formed for a common purpose. It may or may not aim to earn profit. AOPs are taxed as separate entities.

Body of Individuals (BOI)

A BOI is similar to an AOP but includes only individuals. Tax rules are similar to AOPs, and they may be taxed at the maximum marginal rate if income is not divided among members.

Local Authority

Local authorities include municipalities, panchayats, district boards, and port trusts. They are taxed on income from property or services.

Artificial Juridical Person (AJP)

An AJP is any legal entity that is not a natural person and does not fit into other categories. Examples include deities, unregistered societies, and universities. AJPs are usually taxed at rates similar to individuals.

Taxation of Various Persons

Under the Act, an assessee is any person liable to pay tax. Each category of person has different tax rates and compliance rules:

• Individuals and HUFs: Taxed on slab rates with surcharge and cess.
• Companies: Taxed at flat rates, for example, 25% for certain domestic companies.
• Firms and LLPs: Taxed at 30%, partners taxed separately on their share.
• AOPs and BOIs: Taxed at the maximum marginal rate if income is not distributed, or taxed in members’ hands if shared.
• Local Authorities: Taxed on income from operations, with some exemptions for welfare activities.
• AJPs: Taxed like individuals, with some special deductions or exemptions.

This system ensures fair taxation based on the nature and structure of each entity.

Conclusion

The definition of person under Section 2(31) of the Income Tax Act, 1961, is broad and inclusive. It covers individuals, HUFs, companies, firms, AOPs, BOIs, local authorities, and AJPs. Each category has specific tax rules, so correct classification is important.