Direct Tax Laws and International Taxation · E-commerce Transaction and Liability in Special Cases

Representative Assessee and Liability of Agent of a Non-Resident

Updated 11 October 2026 · Fact-checked

A representative assessee is a person who is taxed on income that belongs to someone else, such as a non-resident's agent, a guardian, a receiver or a trustee. Section 303 defines the categories. Section 306 says who is an agent. Section 304 says the representative is liable as if the income were his own.

Understand Liability in Case of Non-Residents and Agents

Some income is earned by a person who cannot be easily reached or cannot act for himself. A non-resident sits abroad. A minor or a person of unsound mind cannot manage affairs. A trust's income goes to beneficiaries. The Act solves this by naming another person who answers to the tax department for that income. That person is the representative assessee (section 303).

Section 303(1) lists five categories:

The agent of a non-resident, for the non-resident's income specified in section 9, including a person treated as agent under section 306.
The guardian or manager of a minor or a person who is mentally ill or of unsound mind, who receives or is entitled to receive the income.
The Court of Wards, Administrator-General, Official Trustee, or a receiver or manager appointed by a court (including anyone who in fact manages property for another).
A trustee under a trust declared by a duly executed written instrument.
A trustee under an oral trust.

Under section 306(1), an agent of a non-resident includes: (a) any person in India who is employed by or on behalf of the non-resident, has a business connection with the non-resident, is the person from or through whom the non-resident receives income directly or indirectly, or is the non-resident's trustee; and (b) any other person, resident or non-resident, who has acquired a capital asset in India by a transfer. So the agent is a narrower idea. Every agent of a non-resident is a representative assessee, but a guardian or trustee is a representative assessee without being an agent.

Two protections matter. A broker in India who deals not directly with the non-resident principal but with or through a non-resident broker is not an agent, if the transactions are in the ordinary course of business through him and the non-resident broker acts in the ordinary course and not as a principal (section 306(2)). Also, no one can be treated as agent unless the Assessing Officer has given him a chance of being heard (section 306(3)).

Once a person is a representative assessee, section 303(4) deems him an assessee, and section 304 sets his liability: 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. Section 305 gives him a right to recover from the principal what he pays, or to retain it from money in his hands.

Key rules to remember

Representative assessee (section 303(1)): Agent of non-resident | guardian or manager of minor or person of unsound mind | court-appointed receiver, manager or similar | trustee (written trust) | trustee (oral trust); Five categories. Learn them as a list; questions ask you to classify a person.
Agent of non-resident (section 306(1)): (a) person in India: employed by or on behalf of / business connection / from or through whom income is received / trustee of the non-resident; (b) any person who acquired a capital asset in India by transfer; Limb (a) needs the person to be in India. Limb (b) covers residents and non-residents.
Broker exception (section 306(2)): Indian broker dealing with or through a non-resident broker is not an agent if (a) transactions are in ordinary course through him and (b) non-resident broker acts in ordinary course, not as principal; Both conditions must be met.
Hearing before agency (section 306(3)): No treatment as agent without opportunity of being heard by the Assessing Officer; Natural justice requirement.
Liability of representative assessee (section 304): Same duties, responsibilities and liabilities as if the income were his own; assessed in own name but in representative capacity only; Section 304(2): no separate assessment under other provisions for that income. Section 304(3): the AO may also assess the principal directly.
Recovery from assets (sections 304(5) and 422): AO may proceed against all property under the representative's control; for non-resident income, tax may be recovered by deduction under Chapter XIX-B and from the non-resident's assets in India; Section 422 applies irrespective of section 304(1) or (5).
Right to recover (section 305): Recover sums paid from the principal, or retain from money in hand; may retain estimated liability; AO certificate if there is a disagreement; Under the certificate, recovery at final settlement is capped at the certified amount, except for additional assets of the principal in his hands.

How to solve Liability in Case of Non-Residents and Agents questions

Use this order for any question on representative assessees or agents of non-residents.

1Identify the principal: is the income that of a non-resident, a minor, a person of unsound mind, a beneficiary, or someone else?
2Match the person in the question to a category in section 303(1). Name the category.
3If the principal is a non-resident, test the person against section 306(1): employment, business connection, income received through him, trustee, or acquisition of a capital asset in India.
4Check the exceptions and safeguards: the broker exception in section 306(2) and the hearing requirement in section 306(3).
5State the liability under section 304: assessed in his own name, in representative capacity, same liability as if the income were his own; the AO may also assess the principal directly.
6Add recovery points: section 304(5) remedy against property, section 422 for non-resident arrears, and section 305 right to recover or retain.
7Conclude with a clear answer in one line.

Quickest way: Three-question check

When to use it: Use for MCQs and short case-based questions where you must decide quickly whether someone is an agent or representative assessee.

Whose income is it? If non-resident, go to agent test; otherwise match to guardian, receiver or trustee.
Is the person in India with employment, business connection, income channel or trust role? Or did he acquire a capital asset in India by transfer? If yes, he is an agent.
Does the broker exception apply, or was the person never given a hearing? If so, agency fails or is incomplete.

Common mistakes in Liability in Case of Non-Residents and Agents

Treating agent and representative assessee as the same thing.
Both terms appear together in section 303(1)(a).
Fix: Remember: the agent of a non-resident is one type of representative assessee. Guardians, receivers and trustees are representative assessees but not agents.
Treating a person as agent without a hearing.
Students focus on the list in section 306(1) and forget the procedure.
Fix: Quote section 306(3): the person must have had an opportunity of being heard by the Assessing Officer.
Applying the broker exception when only one condition is met.
The two conditions are easy to blur.
Fix: Both are needed: ordinary course through the Indian broker, and the non-resident broker acting in the ordinary course and not as a principal.
Saying the representative pays tax from his own pocket with no recourse.
Section 304 stresses liability, and section 305 is overlooked.
Fix: Add that he can recover the sum from the principal or retain it from money in his hands (section 305).
Thinking the department can only assess the representative.
Section 304(1)(a) says assessment is in his name.
Fix: Section 304(3) lets the AO assess the principal directly or recover tax from him. Section 304(5) allows action against property under the representative's control.
Limiting agent to residents in India.
Limb (a) says person in India, so limb (b) is forgotten.
Fix: Under section 306(1)(b), any person, resident or non-resident, who has acquired a capital asset in India by transfer can be an agent.

Worked examples

Example 1

Kaveri Exports Pvt. Ltd., an Indian company, buys goods from Orion Trading LLC, a non-resident, and also acts as its sales promoter in India. Orion receives income through Kaveri's business dealings. Can the Assessing Officer treat Kaveri as the agent of Orion, and what is Kaveri's liability?

Show the solution

Principal is a non-resident, so the agent test under section 306(1) applies.
Kaveri is a person in India. It has a business connection with Orion and Orion receives income from or through it. Either limb (a)(ii) or (a)(iii) is met.
The broker exception in section 306(2) does not apply, as Kaveri is not a broker dealing through a non-resident broker.
Before treating Kaveri as agent, the AO must give it an opportunity of being heard (section 306(3)).
On being treated as agent, Kaveri becomes a representative assessee under section 303(1)(a) and is deemed an assessee (section 303(4)).
Under section 304, Kaveri is liable as if the income were its own, assessed in its own name in representative capacity only. Tax can be recovered from it, and under section 305 Kaveri can recover what it pays from Orion or retain it from money payable to Orion.

Answer: Yes. Kaveri can be treated as Orion's agent after a hearing, and it is liable as representative assessee for tax on Orion's income, with a right of recovery from Orion.

Example 2

Meera, an Indian broker, executes share orders for a client through Atlas Securities, a non-resident broker, which acts in the ordinary course of its business and not as principal. The transactions are in the ordinary course of Meera's business. Is Meera an agent of the non-resident principal?

Show the solution

Meera does not deal directly with or on behalf of the non-resident principal. She deals through a non-resident broker.
Section 306(2) applies to such a broker.
Condition (a): transactions are carried on in the ordinary course of business through Meera. Met.
Condition (b): the non-resident broker acts in the ordinary course of business and not as principal. Met.
Both conditions are satisfied, so Meera is not deemed an agent under section 306 for these transactions.

Answer: Meera is not deemed an agent in respect of these transactions, so she is not a representative assessee for them.

Exam tips

In theory answers, list the five categories of section 303(1) first, then narrow to agents. This shows you know the difference.
Always mention the hearing requirement in section 306(3) when a question asks whether someone can be treated as an agent.
For liability questions, cite sections 304, 305 and 422 together: liability, recovery from principal, and recovery from non-resident assets.
In MCQs, read carefully for the words in India and capital asset by transfer; they decide limb (a) versus limb (b).
Link this topic with section 302 on legal representatives of a deceased person, which is a separate provision with liability limited to the estate.

Practice questions from E-commerce Transaction and Liability in Special Cases

Liability in Case of Non-Residents and Agents: frequently asked questions

What is the difference between an agent and a representative assessee?

A representative assessee is the wider term in section 303(1) and covers agents of non-residents, guardians, court-appointed receivers or managers, and trustees. An agent is one kind of representative assessee, and section 306 defines who is an agent of a non-resident.

Who can be treated as an agent of a non-resident?

A person in India who is employed by the non-resident, has a business connection with it, is the person through whom it receives income, or is its trustee. Also any person, resident or not, who has acquired a capital asset in India by transfer. The person must first be heard by the Assessing Officer.

Is the representative assessee personally liable for the tax?

He is liable as if the income were his own and is assessed in his own name, but only in his representative capacity. He can recover the tax paid from the principal or retain it from money in his hands. The Assessing Officer may also assess the principal directly.

Can tax on a non-resident's income be recovered from the non-resident's assets?

Yes. Section 422 allows recovery by deduction under Chapter XIX-B and recovery of arrears from any assets of the non-resident which are, or may come, within India. This applies whether tax is charged in his name or in his agent's name.