Who Is a “Person” Under Income Tax? A Simple Guide to Section 2(31)

Learn Who Qualifies As A “Person” Under Income Tax According To Section 2(31). Discover Rules For Individuals, Hufs, Companies, And Firms.

Introduction: Why Does “Person” Matter in Tax?

Have you ever wondered who exactly pays income tax in India?

If you think it is only salaried employees or business owners, here is a surprise. Under Indian tax law, the word “person” covers much more than just living, breathing human beings. It includes families, companies, temples, universities, and even village panchayats.

This matters because only a “person” can be taxed. If an entity does not fit this definition, the Income Tax Department cannot touch its income. That is why Section 2(31) of the Income Tax Act, 1961 is so important. It casts the tax net wide and ensures everyone who earns pays their fair share.

In this guide, we will break down the definition of person under Section 2(31) into bite-sized pieces. We will use real examples, updated tax rates for FY 2025–26 (AY 2026–27), and also peek at the upcoming Income Tax Act, 2025 that takes effect from April 2026.

What Is Section 2(31)? The Legal Meaning

Section 2(31) gives an inclusive definition of “person.” This means the list is not final. The law says “person includes…” and then lists seven categories. So even if something does not fit neatly into one box, it might still qualify as a person if the context demands it.

Here is the simple version. A “person” under income tax includes:

1. An individual
2. A Hindu Undivided Family (HUF)
3. A company
4. A firm
5. An association of persons (AOP) or body of individuals (BOI)
6. A local authority
7. Every artificial juridical person not covered above

Key point: Even if an AOP, BOI, local authority, or artificial juridical person was not created to earn profit, it is still treated as a person for tax purposes. The law does not care about intention. It cares about existence.

The 7 Types of “Person” Under Income Tax (With Real Examples)

Let us meet each category one by one. Think of this as a tax “who’s who.”

1. Individual — The Natural Human Being

An individual simply means a natural human being. It does not matter if you are male, female, a minor, or a senior citizen. If you breathe and earn, you are an individual taxpayer.

For example:

Rahul, a 28-year-old software engineer in Bangalore, is an individual. So is his 10-year-old daughter who earned ₹50,000 from a TV ad. In the child’s case, her income is generally clubbed with her parents’ or taxed through her legal guardian.

Tax tip for FY 2025–26: Under the new tax regime, income up to ₹12 lakh is effectively tax-free thanks to the enhanced rebate under Section 87A. Salaried individuals also get a standard deduction of ₹75,000.

2. Hindu Undivided Family (HUF) — The Family as a Taxpayer

A Hindu Undivided Family (HUF) is a unique Indian tax concept. It is a family arrangement recognized under Hindu law. It includes all persons lineally descended from a common ancestor, plus their wives and unmarried daughters.

The head of the HUF is called the Karta, and the members are coparceners.

For example:

The Sharma family has a common ancestral property that generates rental income. Instead of taxing each member separately, the HUF files its own tax return. The Karta, say Mr. Sharma, signs the return.

Why it matters: An HUF gets its own PAN card, can own property, and is taxed separately from its members. It enjoys the same basic exemption limit (₹3 lakh under old regime, ₹4 lakh under new regime) as an individual.

3. Company — The Legal Giant

A company is an artificial legal entity registered under the Companies Act, 2013 (or foreign equivalents). It exists independently of its owners.

This category includes:

• Indian companies
• Foreign companies operating in India
• Certain associations declared as companies by the Board

For example:

Reliance Industries Ltd., Tata Consultancy Services, and Punjab National Bank are all “persons” under Section 2(31). Even a small private limited company with two directors qualifies.

Tax snapshot for FY 2025–26:

• Domestic companies: 25% or 30% depending on turnover and regime
• New manufacturing companies (Section 115BAB): 15%
• Health and education cess: 4% on tax plus surcharge

4. Firm — Partners in Business

A firm is an association of people who carry on business together under a partnership agreement. This includes traditional partnership firms and Limited Liability Partnerships (LLPs) registered under the LLP Act, 2008.

For example:

Three friends—Amit, Bina, and Chirag—start a digital marketing agency as a partnership firm. They share profits in a 40:30:30 ratio. The firm itself is a “person” and must file a tax return. The partners also pay tax on their individual shares, but the firm gets taxed first at the entity level.

Tax rate: Firms and LLPs are generally taxed at a flat 30% plus cess and surcharge.

5. Association of Persons (AOP) & Body of Individuals (BOI)

These are groups of people who come together for a common purpose. The difference is subtle:

For example:

A group of college friends pools money to buy a rental apartment. They did not form a company or firm. They are simply an AOP. The income from rent is taxed in the AOP’s hands.

Warning: If an AOP or BOI does not distribute income among members, it can be taxed at the maximum marginal rate (currently 30% plus surcharge).

6. Local Authority — The Government’s Local Arm

A local authority means bodies like:

• Municipal Corporations
• Panchayats
• Cantonment Boards
• Port Trusts
• District Boards

These bodies are created by law to manage local affairs. They are “persons” because they often earn income from property, services, or fees.

For example:

The Municipal Corporation of Delhi earns rent from market stalls. That rental income is taxable unless specifically exempted. A Village Panchayat that leases community land also falls here.

7. Artificial Juridical Person (AJP) — The Catch-All

This is the “everything else” category. An artificial juridical person is any entity that is not a natural human and does not fit into the above six boxes, but still has a legal identity.

For example:

• Calcutta University or Delhi University
• The Reserve Bank of India
• A deity or idol in a temple (yes, legally recognized!)
• An unregistered society or club

These entities can own property, enter contracts, and sue or be sued. Therefore, they can also be taxed.

Quick Comparison Table: All 7 Categories at a Glance

The Big Shift: Income Tax Act, 2025 (From April 2026)

Here is something every taxpayer must know. The Income Tax Act, 1961 is being replaced by the Income Tax Act, 2025, effective from 1 April 2026 (FY 2026–27 onwards).

Does this change the definition of “person”?

No. The definition under Section 2(31) remains largely unchanged in the new law. The seven categories still exist. However, the new Act simplifies language, removes redundant provisions, and modernizes compliance.

Key transition rules:

• FY 2025–26 (AY 2026–27): Taxed under the 1961 Act
• FY 2026–27 (Tax Year 2026–27): Taxed under the 2025 Act
• For any proceedings related to years before 1 April 2026, the 1961 Act continues to apply

So if you are filing your return in July 2026 for FY 2025–26, you still follow the old Act. But from next year, welcome to the new regime.

Why Correct Classification Matters

Getting the category right is not just academic. It affects:

1. Tax rates: Companies pay flat rates. Individuals pay slab rates.
2. Compliance: An HUF needs a separate PAN. A company needs audited books.
3. Deductions: An individual can claim Section 80C deductions. A company cannot.
4. Filing deadlines: A firm may need a tax audit if turnover crosses ₹1 crore.
5. Penalties: Misclassifying yourself can lead to wrong returns and penalties.

For example:

If you run a business as an AOP but file taxes as a firm, you might miss the correct tax rate or compliance rules. Always match your legal structure to the right “person” category.

Frequently Asked Questions (FAQ)

Q.1.  Who is considered a “person” under Section 2(31) of the Income Tax Act?

A “person” includes seven categories: an individual, HUF, company, firm, AOP/BOI, local authority, and artificial juridical person. This definition is inclusive, meaning other entities may also qualify depending on the context.

Q.2.  Is a minor child considered a “person” under income tax?

Yes. A minor is an individual and therefore a person. However, their income is usually clubbed with that of the parent who earns more, unless it arises from manual work or skill/talent.

Q.3.  Can a temple deity be taxed as a person?

Surprisingly, yes. A deity or idol is treated as an artificial juridical person. If the temple earns rental or donation income that is not exempt under Section 11, the deity can be assessed for tax.

Q.4.  What is the difference between an AOP and a firm?

A firm is created under the Indian Partnership Act, 1932, or the LLP Act, 2008, and has a formal agreement. An AOP is a more informal grouping of persons for a common purpose. Firms have specific tax rates; AOPs may be taxed at slab rates or maximum marginal rates.

Q.5.  Does the new Income Tax Act, 2025 change who is a “person”?

No. The Income Tax Act, 2025 retains the same seven categories of “person” when it takes effect from 1 April 2026. The definition remains broad and inclusive.