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CMA Intermediate · Direct and Indirect Taxation · Taxation of Individuals (including AMT) and HUF

Under the Income-tax Act, 2025, an Indian resident individual, Ramesh, is a member of an association of persons (AOP) whose total income is not chargeable to income-tax at all, because it is below the exemption limit. How is Ramesh's share in the AOP's income treated?

Where no income-tax is chargeable on the total income of the AOP, a member's share is included in his total income and taxed in his hands. The general exemption of the share applies only when the AOP itself bears tax.

  1. AIt is fully exempt in his hands in every case
  2. BIt is taxed only in the AOP and never in the member's hands
  3. CIt is chargeable to tax as part of his total incomeCorrect
  4. DIt is taxed as his capital gains at a flat special rate

Explanation

The share of a member is not taxed in his hands in general. The exception applies where no income-tax is chargeable on the total income of the AOP. In that case the share computed as per section 309 is chargeable as part of the member's total income. The 'fully exempt' option ignores this exception.

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