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Regarding taxation of aop

ANONYMOUS (ca fresher) (51 Points)

27 March 2016

How to calculate tax of the member in case if any of the members of an aop are not having the income greater than max amt not chargeable to tax and aop is taxed as the rate on individual. Also i want to ask whether 86 is applied after providing rebate of 87 a under income tax act and calculation of tax liabilty

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Ajay (CA Job) (512 Points)
Replied 28 March 2016

Dear _______

1. In case none of the member has income greater than that is chargeable to tax, then the AOP will be taxed at normal rate of tax applicable to individuals. Also, the share of the member in AOP shall be included in his total income but a rebate under Sec. 86 read with Sec.110, is allowed to him, i.e. a deduction at an average rate of tax on the share of the member in AOP.

Procedure in brief is as follows:

a. From total income of AOP, deduct salary, interest etc payable to the member.

b. Balance arrived at should be apportioned amongst the members.

c. Add the respective salary, interest etc received by the member from AOP to the above apportioned share.

d. Share included in the income of the member needs to classified into different heads of income just as it was classified in the hands of the AOP.

e. Thereafter compute the tax based on slab and deducting the rebate u/s 87A and arrive at the tax payable amount.

f. Then compute the rebate u/s 86 read with Sec. 110 at the average rate of income tax. Deduct the rebate from the above arrived figure and that is the final amount of tax payable.

g. Assure Alternate Minimum Tax is not applicable.

2. Yes, Sec.86 is applied after providing for rebate u/s 87A.

Regards

Ajay