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

Where an AOP is chargeable to tax at a rate lower than the maximum marginal rate, but some income-tax is payable by the AOP, how does the Act treat a member's share in the AOP's income in the member's hands? The member is an individual assessee.

The share forms part of the member's total income. Exclusion is available only if the AOP is chargeable at the maximum marginal rate or any higher rate. If the AOP is taxed at a lower rate, the share is included in the member's total income.

  1. ANot included in his total income at all
  2. BIncluded in his total incomeCorrect
  3. CIncluded only at 50% of the share
  4. DTaxed at the maximum marginal rate separately

Explanation

Where the AOP is not taxed at the maximum marginal rate or any higher rate, the share of the member forms part of his total income, in any other case under the provision. The member would then get relief for tax already paid by the AOP as per the Act, but the share is still included. Exclusion applies only where the AOP is taxed at the maximum marginal rate.

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