Section 166 of the Income-tax Act, 1961: Direct Assessment or Recovery Not Barred
Updated: 27 October 2026 | Includes the Income-tax Act, 2025
Section 166 preserves the tax authority's power to assess or recover tax directly from the person who beneficially receives income, even when the law also permits assessment through a representative assessee. Its corresponding rule under the Income-tax Act, 2025 appears in Section 304(3).
Text and meaning of Section 166
The operative wording of Section 166 of the Income-tax Act, 1961 is:
Nothing in the foregoing sections in this Chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income.
In practical terms, the presence of a trustee, agent, guardian or other representative assessee does not, by itself, prevent the Income Tax Department from proceeding directly against the person represented. This is a provision preserving an alternative statutory route; it is not a rule permitting the same tax to be collected twice.
Important legal terms
Representative assessee
Under Sections 160 and 161 of the 1961 Act, a representative assessee is a person made responsible for tax obligations in respect of income received or receivable on behalf of another, in the circumstances specified by law. The corresponding 2025 provisions include Sections 303 and 304.
Beneficiary or person represented
The person on whose behalf or for whose benefit the relevant income is received. Depending on the facts, this may be a trust beneficiary, non-resident principal, minor or another person represented under the statutory provisions.
Direct assessment
Assessment of the person entitled to the income in that person's own capacity, rather than assessing only the representative in a representative capacity.
Direct recovery
Recovery of tax payable in respect of that income from the person represented, subject to the applicable assessment, demand and recovery procedures.
Scope and operation of Section 166
- Alternative assessment route: The Assessing Officer is not restricted to assessing the representative assessee where the statutory requirements for direct assessment are satisfied.
- Alternative recovery route: The tax payable in respect of the income may be recovered from the person for whose benefit it was received.
- Representative liability remains relevant: Section 161 addresses the representative's liability; Section 162 addresses recovery of tax paid by the representative.
- No double collection: Alternative avenues of assessment or recovery must not be confused with an entitlement to collect the same tax liability twice.
Corresponding provision: Section 304(3) of the Income-tax Act, 2025
The 2025 Act consolidates provisions concerning representative assessees. Section 304(3) expressly permits the Assessing Officer, irrespective of the other provisions of the relevant Chapter, to directly assess the person on whose behalf or for whose benefit the income is receivable, or to recover the related tax from that person.
| Income-tax Act, 1961 | Income-tax Act, 2025 |
|---|---|
| Section 166 - Direct assessment or recovery not barred | Section 304(3) - Direct assessment or recovery from the person represented |
| Section 161 - Liability of representative assessee | Section 304 - Liability of representative assessee |
| Section 165 - Part of trust income chargeable | Section 304(4) - Proportionate chargeable trust income |
| Section 167 - Remedies against property | Section 304(5) - Remedies against property controlled by the representative |
Illustrative example
A trustee receives taxable income for an identified beneficiary. The trustee may have obligations as a representative assessee under the applicable law. However, the Department may also assess the beneficiary directly or recover tax payable on that income from the beneficiary, where the legal conditions are met. The amount payable and the appropriate person to assess depend on the income, status of the parties and applicable statutory provisions.
Which Act applies after 1 April 2026?
The Income-tax Act, 2025 applies to tax years commencing on or after 1 April 2026. Under its saving and transition provisions, including Section 536, assessments and other proceedings relating to earlier tax years may continue under the Income-tax Act, 1961. Therefore, Section 166 remains important when examining historical assessments, notices, disputes and tax demands.
Related statutory provisions
- Section 163 - Who may be regarded as agent
- Section 164 - Taxation where beneficiaries' shares are unknown
- Section 165 - Part of trust income chargeable
- Section 167 - Remedies against property
Official legal sources
- Income Tax Department - Section 166, Income-tax Act, 1961
- Income Tax Department - Income-tax Act, 1961, as amended by Finance Act, 2025 (PDF)
- Income Tax Department - 1961 to 2025 section correspondence (PDF)
- Income Tax Department - New Act transition and saving provisions FAQ
Frequently asked questions
Can a beneficiary be assessed directly?
Yes. Section 166 of the 1961 Act and Section 304(3) of the 2025 Act preserve the power of direct assessment or recovery in the circumstances covered by those provisions.
Does appointing a trustee prevent direct tax recovery from a beneficiary?
No. A representative arrangement does not automatically prevent direct recovery from the person for whose benefit the income is receivable.
Is Section 166 still relevant after the new Act?
Yes. It remains relevant for earlier tax years and proceedings preserved by the transitional provisions.
This article is for general legal information. The applicable tax treatment depends on the relevant tax year, assessment record and facts of the case.