Tax Calculation of AOP
- Where the share of members is determinable.
- Where the shares of members is not determinable.
First we will understand when the share of the members is determinable. Under this situation also there are two possibilities. They are :-
- No member of AOP has income exceeding the basic exemption limit – Where is no member having income chargeable to tax than income of AOP will be taxed as it is taxed in case of individual.
- If any member of AOP has income exceeding the basic exemption limit – In case where any of the member of AOP has income chargeable to tax than the income of AOP will be taxed at maximum marginal rate.
- If any of the members of the AOP have income chargeable at the rate of maximum marginal rate, tax should be calculated as follows:
- Income of such member in the AOP should be calculated by taking such higher rate as the member has &
- The other balancing income of the AOP shall be taxable at the maximum marginal rate.
Secondly where the shares of the members are indeterminable. In these case the total income of the AOP shall be taxed at the maximum marginal rate. In case of any of the members has income chargeable to tax at a higher rate than the maximum marginal rate than income of AOP shall be taxed at such higher rate and not maximum marginal rate.
Taxation of Members of AOP:
There can be three options where the taxation of members of AOP can be calculated:
- Where the member of AOP is falling under the tax at maximum marginal rate or such higher rate than the income of the member shall not be included in the total income.
- Where the member of AOP is falling under the tax at normal tax applicable to individual than the tax would be calculated on such income and included in the total income but the rebate of the same would be available from the total income.
- Where the income of AOP is not chargeable to tax than the income of members would be chargeable to tax and would be liable to pay tax.
Tax Calculation of AOP
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