Income Tax Assessment of Association of Persons & Body of Individuals

“Explore the nuances of Income Tax Assessment for Associations of Persons (AOP) and Bodies of Individuals (BOI) for the Assessment Year 2024-2025. Understand the computation of Gross Total Income, available deductions, applicable tax rates, and special incomes. Delve into the amendments proposed in the Finance Act 2023, including the introduction of Section 115BAC with revised tax rates. Stay informed about the latest tax slab for AOP and the surcharge rates. Get expert insights into the amendments and their implications.”

Chapter: V Assessment of Association of Persons and Body of Individuals for the A.Y 2024-2025.

Association of Persons means an association in which two or more persons join in for a common purpose or common action to produce income, profits or gains.

AOP or BOI is treated as a separate entity for the purpose of assessment under the income tax Act.

Assessment Year 2022-2023

Gross Total Income can be computed as follows

1.Income from House Property

2.Income from business or Profession

3.Income from Capital Gains

4.Income from Other Sources.

Deductions available to AOP/BOI are the following

1. Sec 80 G

2. Sec 80 GGA

3. Sec 80 GGC

4. Sec 80 IA

5. Sec IAB

6. Sec IB

7. Sec 80 IBA

8. Sec 80 IC

9.  Sec 80 IE

10. Sec 80 JJA

11. Sec 80 JJAA

12.Sec 80 LA.

Tax Rates Applicable to AOP/BOI.

Picture:1

(Source: https://www.incometax.gov.in/iec/foportal/help/non-company/return-applicable-0#taxdeductions).

Special Incomes are taxed as follows:

Long Term Capital Gains–10% or 20%

Short Term Capital Gains as per section 111A-15%

Income from lotteries, crossword puzzles-30%

Maximum Marginal Rate : 42.744%(30% +37% Surcharge+4% Health and Education Cess).

Tax Slab applicable to AOP (When taxable at the rate of Individual).

Table No: 1

Assessment Year 2023-24      

Gross Total Income can be computed as follows

1.Income from House Property

2.Income from business or Profession

3.Income from Capital Gains

4.Income from Other Sources.

Deductions available to AOP/BOI are the following

1. Sec 80 G

2. Sec 80 GGA

3. Sec 80 GGC

4. Sec 80 IA

5. Sec IAB

6. Sec IB

7. Sec 80 IBA

8. Sec 80 IC

9. Sec 80 IE

10. Sec 80 JJA

11. Sec 80 JJAA

12.Sec 80 LA.

Tax Rates Applicable to AOP/BOI

Picture:2

(Source:https://www.incometax.gov.in/iec/foportal/help/non-company/return-applicable-0#taxdeductions).

Special Incomes are taxed as follows:

Long Term Capital Gains–10% or 20%

Short Term Capital Gains as per section 111A-15%

Income from lotteries, crossword puzzles-30%

Maximum Marginal Rate: 42.744% (30% +37% Surcharge+4% Health and Education Cess)

Table No: 2

Tax Slab applicable to AOP (When taxable at the rate of Individual)

Assessment Year 2024-25(As per Finance Act 2023)                    

Besides the above provisions ,the following  amendments are also proposed in the fiance bill 2023.

Sec 115 BAC is applicable to AOP/BOI

Table No: 3

Sec 115 BAC Tax Rates

In respect of an Individual, HUF, AOP**, BOI, and Artificial Juridical Person, the rate of surcharge for the Assessment Year 2024-25 shall be as under:

Table: 4.Surcharge

 The rate of surcharge in case of assessee’s opting for alternate tax regime under section 115BAC shall be 25% instead of 37% for A.Y. 2024-25

The surcharge rates for AOP with all members as a company, cannot exceed 15%.

Amendments in the Finance Act 2023.

In section 115BAC of the Income-tax Act,—

(A) With effect from the 1st day of April, 2024,—

(a) in the marginal heading, for the words “and Hindu undivided family”, the words “, Hindu undivided family and others” shall be substituted;

(b) in sub-section (1), for the figures, letters and words “1st day of April, 2021”, the figures, letters and words “1st day of April, 2021 but before the 1st day of April, 2024” shall be substituted;

(c) after sub-section (1), the following sub-section shall be inserted, namely:—

“(1A) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being an individual or Hindu undivided family or association of persons (other than a co-operative society), or body of individuals, whether incorporated or not, or an artificial juridical person referred to in sub-clause (vii) of clause (31) of section 2, other than a person who has exercised an option under sub-section (6), for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024, shall be computed at the rate of tax given in the following Table, namely:—

Table No:5

(B) with effect from the 1st day of April, 2023, in sub-section (2), in clause (i), after the words, figures and letters “section 80CCD or”, the words, brackets, figures and letters “sub-section (2) of section 80CCH or” shall be inserted;

(C) with effect from the 1st day of April, 2024,—

(a) in sub-section (2), for the opening portion and clause (i) thereof, the following shall be substituted, namely:—

“(2) For the purposes of sub-section (1A), the total income of the person referred to therein, shall be computed—

(i) without any exemption or deduction under the provisions of clause (5) or clause (13A) or prescribed under clause (14) (other Amendment of section 115BAC.—

(ii) than those as may be prescribed for this purpose) or clause (17) or clause (32), of section 10 or section 10AA or clause (ii) or clause (iii) of section 16 or clause (b) of section 24 [in respect of the property referred to in sub-section (2) of section 23] or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA;”;

(b) in sub-section (3), after the proviso, the following proviso shall be inserted, namely:—

“Provided further that in a case where,—

(i) the assessee has not exercised the option under sub-section (5) for any previous year relevant to the assessment year beginning on or before the 1st day of April, 2023;

(ii) the income-tax on the total income of the assessee is computed under sub-section (1A); and

(iii) there is a depreciation allowance in respect of a block of assets which has not been given full effect prior to the assessment year beginning on the 1st day of April, 2024, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2023 in the manner as may be prescribed.”;

(c) for sub-section (4), the following sub-section shall be substituted, namely:—

‘(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA,—

(i) who has exercised option under sub-section (5) for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021 but before the 1st day of April, 2024;

(ii) whose total income is computed under sub-section (1A),

the conditions contained in sub-section (2) shall be modified to the extent that the deduction under section 80LA shall be available to such Unit subject to fulfilment of the conditions contained in the said section.

Explanation.—For the purposes of this sub-section, the term “Unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005.’;

(d) in sub-section (5), after the proviso, the following proviso shall be inserted, namely:— “Provided further that the provisions of this sub-section shall not apply for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2024.”;

(e) after sub-section (5), the following sub-section shall be inserted, namely:—

“(6) Nothing contained in sub-section (1A) shall apply to a person where an option is exercised by such person, in the manner as may be prescribed, for any assessment year, and such option is exercised,—

(i) on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for such assessment year, in case of a person having income from business or profession, and such option once exercised shall apply to subsequent assessment years; or

(ii) along with the return of income to be furnished under sub-section (1) of section 139 for such assessment year, in case of a person not having income referred to in clause (i):

Provided that the option under clause (i), once exercised for any previous year can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise the option under this sub-section, except where such person ceases to have any income from business or profession in which case, option under clause (ii) shall be available.”

(Republished with amendments)