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Sreeram Viswanath

Expert

Published on: Jun 24, 2026

Association Of Persons Vs Body Of Individuals

Association of Persons (AOP), according to the Income Tax Act, 1961, is the integration of two or more persons for a common purpose, and primarily with an intention to earn some income. A person, in AOP terminology, can be a

company or a body of individuals, whether or not incorporated. An AOP can be formed without a contract. Body of Individuals (BOI) is also similar to an Association of Persons. However, in a Body of Individuals, only two or more individuals can join with an intention to earn some income. Hence, Body of Individuals only contains individuals, while an Association of Persons could contain legal entities.

Taxation - Association of Persons & Body of Individuals

An AOP or BOI can be assessed in the following manners:

  • Where in case of AOP or BOI, the individual share of members are unknown or intermediate.
  • Where in case of AOP or BOI, the individual share of members are known or determinate.

Individual Shares of Members - Unknown

When the individual share of the members of AOP/BOI in the whole or part of its income are intermediate or unknown, tax shall be charged on the Total Income (exclusive of income taxable at special rate) of the AOP/BOI at the maximum marginal rate. If the income of any member of AOP  is chargeable at a rate which is higher than the marginal rate, the former will apply i.e. higher rate will be charged on the total income of the AOP.

Individual Shares of Members - Known

Where the total income of any member of AOP/BOI exceeds the Maximum Exemption Limit, the particular member with a higher income will be charged at the maximum marginal rate @ 30% plus surcharge @ 10.15% as the case may be, if applicable, along with Cess at the rate of 3% on his/her total income, exclusive of income taxable at special rate. When none of the members receive total income exceeding maximum exception limit, either of the situations may emerge:

  • None of the members have total income exceeding maximum exemption limit, and none of the members are taxable at a rate more than maximum marginal rate-  The AOP in this case will pay income-tax on its total income at the slab rates which are same as applicable to an individual. The AOP will be gaining the benefit of basic exemption of Rs 2,50,000.
  • None of the members receive an income exceeding the maximum exemption limit, but one or more members are liable to tax rate of more than the maximum limit, which is possible only if the foreign company is also a member- On the particular portion of income of AOP which is related to the member, the tax rate applicable shall be rate of income-tax which is applicable to such member, and the balance total income of AOP shall be charged at the marginal rate.

Share of Income and Exemption Rules

  • Where the AOP/BOI pays tax at a higher or marginal rate, the share of profit of AOP/BOI will not be included in the Total Income of the members, and thereby will be exempted.
  • Where the AOP/BOI pays tax at the same rate as applicable to an individual, the resulting share of income shall be included into the Total Income of each of the members.
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Frequently Asked Questions

Common questions about Association of Persons vs Body of Individuals in Taxation.

An Association of Persons (AOP) refers to a group of individuals, companies, or other legal entities that come together for a common purpose, usually to earn income. On the other hand, a Body of Individuals (BOI) is a specific type of AOP that consists only of individuals and does not include any legal entities.
The income of an AOP or BOI can be taxed in two ways: either at the maximum marginal rate if the individual shares of members are unknown or indeterminate, or at the applicable slab rates or rates applicable to specific members if the individual shares are known and determinate.
If the individual shares of members in the income of an AOP or BOI are unknown or indeterminate, the entire income is taxed at the maximum marginal rate. However, if the individual shares are known or determinate, the income can be taxed at the applicable slab rates or rates specific to certain members, potentially resulting in a lower tax liability.
When individual shares are known, the tax rate is determined based on the total income of each member. If a member's total income exceeds the maximum exemption limit, they are taxed at the maximum marginal rate. If none of the members exceed the exemption limit, the AOP or BOI is taxed at the slab rates applicable to individuals.
If an AOP or BOI pays tax at the maximum marginal rate, the share of income received by the members is not included in their total income, effectively exempting it from further taxation at the individual level.
If an AOP or BOI pays tax at the same rates as applicable to individuals, the resulting share of income received by each member is included in their total income and taxed accordingly.
Yes, a foreign company can be a member of an Association of Persons (AOP). In such cases, if the foreign company is liable to pay tax at a rate higher than the maximum marginal rate, the portion of the AOP's income attributable to the foreign company will be taxed at that higher rate.
An AOP or BOI can avail the same basic exemption limit of Rs 2,50,000 as an individual taxpayer if none of the members' total income exceeds the maximum exemption limit and the AOP or BOI is taxed at the slab rates applicable to individuals.
If some members of an AOP or BOI are taxable at rates higher than the maximum marginal rate, the portion of the AOP's or BOI's income attributable to those members is taxed at their respective higher rates, while the remaining income is taxed at the maximum marginal rate.
Yes, an Association of Persons (AOP) can be formed without a formal contract, as long as there is an intention among the members to come together for a common purpose, typically to earn income.