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CMA Intermediate · Direct and Indirect Taxation · Income which does not form part of Total Income

Under the Income-tax Act, 2025, an association of persons (AOP) is chargeable to tax at the maximum marginal rate on its total income. Ravi, a member, has received his share of Rs 3,00,000 in the AOP's income, computed under the relevant section. Which treatment applies to Ravi's share?

Ravi's Rs 3,00,000 share is not included in his total income. Because the AOP is chargeable at the maximum marginal rate, section 310(1) and 310(3)(a) of the Income-tax Act, 2025 exclude the member's share, so Ravi pays no further tax on it.

  1. AIt is included in Ravi's total income and taxed at slab rates
  2. BIt is not included in Ravi's total incomeCorrect
  3. CIt is included only to the extent of 50% of the share
  4. DIt is included in Ravi's total income, with the AOP's tax allowed as a deduction from his income

Explanation

Section 310(1) says no income-tax is payable by a member on his share in the AOP's income. Section 310(3)(a) confirms that where the AOP is taxed at the maximum marginal rate or higher, the share is not included in the member's total income. The slab-rate option wrongly applies the rule meant for an AOP that has no tax chargeable.

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