According to the Income Tax Act of 1961, “Association of Persons” (AOP) is defined as any organization consisting of two or more individuals that work together towards a shared goal, with the primary motivation being financial profit. According to the nomenclature of the AOP, “a person” may refer to either a corporation or a collection of individuals, regardless of whether or not they are organized as a corporation. A contract is not necessary to build an AOP. Association of Persons and Body of Individuals are comparable conceptions. But, in order to form a Body of Individuals with the intention of making money, there must first be at least two people involved in the endeavor. Consequently, in contrast to an Association of Individuals, which might include organizations, a Body of Individuals consists entirely of individuals. Scroll down to check the differences between an Association of Persons and Body of Individuals.
Check the differences between an Association of Persons and Body of Individuals:
The following procedures may be used to investigate either an AOP or a BOI:
Individual Members’ Shares Are Unknown:
If the individual shares of the members in the whole or a portion of the AOP or total BOI’s income are unclear or intermediate, then tax must be imposed on the profits of the AOP or total BOI at the greatest marginal rate possible (with the exception of income that is taxable at a special rate). All of the preceding information is still accurate, and the higher tax rate will be applied to the total income of the AOP if the income of any member is subject to a tax rate that is greater than the rate that was anticipated.
Individual Members’ Shares are known:
When a member of AOP/BOI has a total income that is higher than the Max Exemption Limit, that member will be assessed at the highest marginal rate of 30%, plus a surcharge of 10.15 percent, if necessary, in addition to paying a 3% Cess on their total income, excluding income subject to special taxation.
If no member of the family has an income that is higher than the exemption threshold, then none of the following things are likely to occur:
Income Distribution and Exemption Needs:
Members of Association of Persons and Body of Individuals will not be required to declare the percentage of their earnings that is subject to the higher marginal tax rate due to the tax implications of this change.
If the AOP or BOI pays tax at the same rate as an individual, then each member’s share of the profits will be added to their total income. This is the case even if the AOP or BOI does not pay tax.
An association of persons (whether they be individuals, HUF, organizations, corporations, etc.), who meet together for a shared goal or purposes, is denoted by the acronym AOP (s). Every possible gathering of people cannot be categorized as an “AOP” since it is not possible to do so. They are not considered AOP until such time as they form a coalition with other people in order to engage in economic activities. Although BOI refers to a collection of individuals (individual alone) who join together for a common goal or purposes, regardless of whether or not they make income from their activities, BOI does not include such individuals. For purposes of taxation, an AOP or BOI is considered to be a collection of co-heirs, co-donees, or other individuals who act in concert. In the event that the AOP has income, only the AOP will be subject to taxation, and the members of the AOP will not be subject to individual taxation in relation to the income of the AOP.