Taxation of AOP (Association of Persons) Based on Member Share Determinability

1. Where Share of Members is Determinate: 

When the individual shares of the members in the AOP’s income are clearly defined and ascertainable, the tax liability is determined as follows:

• When None of the Members Has Income Exceeding the Basic Exemption Limit:

In such a scenario, the total income of the AOP is taxable at the slab rates applicable to individuals. However, if any member’s total income is subject to tax at a rate higher than the maximum marginal rate (MMR), then:

The portion of the AOP’s income attributable to that member will be taxed at the higher applicable rate for that member.

The remaining portion of the AOP’s income will be taxed at the maximum marginal rate (i.e., 30% plus applicable surcharge and health & education cess).

• When Any Member Has Income Exceeding the Basic Exemption Limit: 

In this case, the entire income of the AOP shall be taxed at the maximum marginal rate.

However, if any member’s income is taxable at a rate exceeding the MMR, then:

The share of the AOP’s income attributable to such member will be taxed at their applicabl higher rate.

The balance income of the AOP will be subject to the MMR.

 2. Where Share of Members is Indeterminate or Unknown:

If the individual shares of members cannot be determined—either at the time of formation of the AOP or at any time thereafter—then:

The entire income of the AOP shall be taxed at the maximum marginal rate.

Moreover, if any member is taxable at a rate higher than the MMR, the entire income of the AOP will be taxed at such higher rate.