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Assessment of Association of person(AOP) and Body of Individual(BOI) under income Tax

Assessment of AOP/BOI 1.   As per section 40(ba), while computing the income of AOP/BOI under the PGBP, any interest, salary, bonus, commission or remuneration by whatever name called, paid by such Association or body to a member thereof, shall not be allowed as deduction.

2.   However, while disallowing such interest paid, if any interest is also paid by the member to AOP/BOI, then net interest shall only be disallowed.

3.   But where the individual who is a member in a representative capacity is paid interest otherwise than as member in representative capacity, such interest shall not be disallowed.

4.   AOP/BOI will be assessed in the following two manner:-

(a)            Where individual shares of members are not known

(b)            Where individual shares of members are  known

(I) Assessment of AOP/BOI and its members when individual shares of members are not known:

1.     AOP/BOI: whole income of AOP/BOI will be taxable at maximum Marginal Rate (30%+SC+EC) or rate applicable to foreign company if foreign company is member.

2.     Member: Members shares from AOP/BOI will not be included in their individual income.

(II)   Assessment of AOP/BOI and its members when individual shares of members are  known:

1.     Where none of the members has total income exceeding Maximum Exemption Limit:

(a)            AOP/BOI: will be assessed as individuals if all members are individuals. Otherwise at applicable rate of members for their portion.

(b)            Members: Members shares from AOP/BOI will be included in their individual income and member will be entitled to rebate u/s 86

2.     Where one or more of the members has total income exceeding Maximum Exemption Limit:

(a)  AOP/BOI: Maximum Marginal Rate, if any foreign company is member then its share shall be chargeable at 40%+SC+EC.

(b) Members: Members shares from AOP/BOI will not be included in their individual income.

 

 

 

Also read:

Assessment of Firm under Income Tax Act,1961

 

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