Section 304 · Special persons
Section 304 of the Income-tax Act, 2025 — Liability of Representative Assessee (Trustees, Guardians & Agents)
By CA Rajat Agrawal
Updated 05 Jul 2026
Chapter XVII
📜 What the law says — Section 304, Income-tax Act 2025
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, responsi-
bilities 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 in his own name
in respect of that income and any such assessment 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.
(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.
31
(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.
(4) If only part of the income of a trust is chargeable under this Act, then the pro-
portion of income receivable by a beneficiary from such trust derived from the
chargeable part shall be determined as follows:—
A
× 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.
(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 rep-
resentative 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.
Right of representative assessee to recover tax paid.
In plain language
What Section 304 actually says
Section 304 of the Income-tax Act, 2025 lays down the liability of a representative assessee — a person who is taxed on someone else's income because they hold, receive, manage or control that income for the real owner. It is the direct successor to Sections 161, 162, 166 and 167 of the old Income-tax Act, 1961, consolidated into a single, cleaner section. It sits inside Chapter XVII (Special Provisions Relating to Certain Persons) and takes effect from 1 April 2026.
The core idea is a legal fiction: the law treats the representative as if the income were his own, purely so the tax can be assessed and collected — but only in his "representative capacity". It does not change who really owns the income.
Who is a representative assessee?
The persons covered are defined in Section 303 (read with Section 306). Section 304 fixes the liability of each of them:
- Trustees of a trust declared by a written instrument (private trusts, family trusts).
- Guardians or managers of the income of a minor, or of a person who is mentally ill or of unsound mind.
- Court of Wards, Administrator-General, Official Trustee, or a receiver/manager appointed by a court.
- Agents of a non-resident — a person in India through whom the non-resident earns income (treated as agent under Section 306).
The key rules in Section 304
- Sub-section (1) — Same liability, in own name: The representative is subject to the same duties, responsibilities and liabilities as if the income were received by him beneficially. He is assessed in his own name but only in his representative capacity, and tax is levied and recovered from him in the same manner and to the same extent as from the person he represents. Crucially, the tax character (rate, exemptions, deductions) is measured as it would apply to the beneficiary.
- Sub-section (2) — No double assessment: If income is assessable in the hands of the representative, it cannot also be assessed under any other provision in the same person's hands. The same rupee of income is taxed once, not twice.
- Sub-section (3) — Direct assessment of the beneficiary: The Assessing Officer still has the option to assess or recover the tax directly from the beneficiary (the real owner). The Department chooses whom to proceed against; it is not forced to go only through the trustee/agent.
- Sub-section (4) — Apportionment for part-chargeable income: Where only part of the trust income is chargeable, the beneficiary's taxable share is worked out by the formula (A ÷ B) × C, where A = chargeable income, B = total income of the trust, and C = the amount actually received by that beneficiary.
- Sub-section (5) — Recovery remedies against property: The Assessing Officer has the same recovery remedies against all property vested in, or under the control/management of, the representative as he would have against a normal defaulter's property — whether the demand is raised on the representative or on the beneficiary directly.
The maximum marginal rate trap (important for trusts)
Section 304 fixes who is liable, but the rate is governed by related charging provisions carried over from Sections 164/164A of the 1961 Act. In practice:
- If the beneficiaries and their shares are known and determinate (a specific trust), tax on the representative is charged as it would be on each beneficiary — normal slab rates apply.
- If it is a private discretionary trust (shares unknown/indeterminate), the trust's income is generally taxed at the Maximum Marginal Rate (MMR) of 30% plus surcharge and cess — no basic exemption, no slab benefit. A key exception: a discretionary trust created by a Will (testamentary), where it is the only trust and the settlor had no other trust, can still get slab-rate treatment.
Practical implications
- Trustees, guardians and agents must file returns and pay tax for the income they hold, even though the money is not their own.
- Because of Section 305, a representative can recover the tax paid from the beneficiary or retain it out of funds in hand — so he is not out of pocket.
- The Department can pursue either the representative or the beneficiary, giving it flexibility to protect revenue.
- Getting the trust deed clearly worded (determinate shares) can be the difference between normal slab rates and a flat 30%+ MMR.
💡 Example
Worked example 1 — Determinate (specific) trust: A family trust holds shares and earns ₹9,00,000 of income in FY 2026-27, distributed equally to two adult beneficiaries (₹4,50,000 each). Because the shares are known, the trustee (as representative assessee under Section 304) is taxed as if each beneficiary earned ₹4,50,000. Under the new-regime slabs each beneficiary's slice attracts tax broadly as an individual would pay — far lower than a flat 30%. The trustee pays the tax and, under Section 305, recovers it from the beneficiaries' shares.
Worked example 2 — Discretionary trust and apportionment (sub-section 4): A discretionary trust has total income ₹10,00,000 (B), of which ₹6,00,000 is chargeable (A) — the balance being exempt. A beneficiary receives ₹2,00,000 (C). The chargeable portion attributable to him = (A ÷ B) × C = (6,00,000 ÷ 10,00,000) × 2,00,000 = ₹1,20,000. Since shares are indeterminate, the trust's chargeable income is generally taxed at the Maximum Marginal Rate (30% + surcharge + 4% cess), so ₹6,00,000 could bear roughly ₹1,87,200 of tax (30% + 4% cess), before any surcharge.
A relatable story: Meera passes away leaving a minor son, Aarav, who inherits rental property earning ₹3,60,000 a year. Aarav cannot file taxes himself, so his uncle, appointed guardian, becomes the representative assessee under Section 304. The uncle files and pays the tax in his own name "as guardian of Aarav" — but only on Aarav's income, not mixed with his own salary. Later he reimburses himself from Aarav's rent collections under Section 305. If the tax office prefers, it can also assess Aarav directly under sub-section (3) — but it can never tax the same rent twice.
| Aspect | Position under Section 304, Income-tax Act 2025 |
|---|
| Old-law equivalent | Sections 161, 162, 166 & 167 of the Income-tax Act, 1961 |
| Who is liable | Trustee, guardian/manager of minor or person of unsound mind, Court of Wards, Administrator-General, Official Trustee, court receiver, agent of a non-resident (see Sec 303 & 306) |
| Extent of liability [304(1)] | Same duties and liabilities as the beneficiary; assessed in own name in representative capacity only |
| Double assessment [304(2)] | Barred — income taxed once, not under another provision too |
| Direct assessment of beneficiary [304(3)] | Allowed at the AO's option |
| Apportionment formula [304(4)] | (A ÷ B) × C, where A = chargeable income, B = total income, C = amount received by beneficiary |
| Recovery [304(5)] | AO has same remedies against property held/controlled by the representative |
| Rate — specific trust (known shares) | Normal slab rates, as applicable to each beneficiary |
| Rate — discretionary trust (unknown shares) | Maximum Marginal Rate = 30% + surcharge + 4% cess (Will-based testamentary trust may get slab rates) |
| Effective from | 1 April 2026 (Income-tax Act, 2025 as amended by Finance Act, 2026) |
Related sections
Section 303 — Who is a representative assessee Section 305 — Right of representative assessee to recover tax paid Section 306 — Who may be regarded as agent of a non-resident Section 302 — Legal representative (liability of deceased's estate) Section 300 — Application of other provisions of the Act to representative assessees Section 301 — Interpretation for the representative-assessee chapter
Frequently asked questions
Does Section 304 make the trustee pay tax out of his own pocket?
No. The trustee is assessed only in his representative capacity on the trust's income, not on his personal money. Under Section 305 he can recover the tax paid from the beneficiary or retain it out of the funds he holds for them.
Can the tax department tax both the trustee and the beneficiary on the same income?
No. Section 304(2) bars double assessment of the same income. However, under Section 304(3) the Assessing Officer may choose to assess the beneficiary directly instead of the representative — but only one of them is taxed on that income.
What rate applies to a private discretionary trust under the 2025 Act?
If the beneficiaries' shares are unknown or indeterminate, the trust's income is generally taxed at the Maximum Marginal Rate of 30% plus surcharge and 4% cess, with no basic exemption. A discretionary trust created by a Will (and the only such trust) is an exception and can get normal slab rates.
Who counts as a representative assessee?
Under Section 303 read with Section 304, it includes trustees of written trusts, guardians or managers of a minor's or an unsound-mind person's income, the Court of Wards, Administrator-General, Official Trustee, court-appointed receivers, and agents of non-residents.
How is tax split when only part of a trust's income is chargeable?
Section 304(4) uses the formula (A ÷ B) × C, where A is the chargeable income, B is total trust income, and C is the amount received by the beneficiary. This gives the chargeable portion attributable to that beneficiary.
What is the old-law equivalent of Section 304?
Section 304 of the Income-tax Act, 2025 consolidates Sections 161, 162, 166 and 167 of the Income-tax Act, 1961 into a single provision governing the liability and recovery from representative assessees.
Does being a representative assessee change ownership of the income?
No. It is purely a compliance and tax-collection mechanism. The representative acts as a conduit; the beneficiary remains the true owner of the income and property.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 05 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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