AoP & Govt Flashcards
Does AoP means association of individuals?
Can a jointly taken single transaction be taxed as AoP?
- AoP means association of Persons (not necessarily individuals), members can be AoPs or Company or Mix
- Yes a jointly undertaken transaction of persons (whether have or not name, premises, registered or not) can be taxed as separate persons’ income as AoP. Separate NTN, Registration, return filling.
Taxation of Govt. S49, Are governments subject to Tax?
Yes, Limited
– Provincial & Local Govts when IFB and earned from outside their jurisdictions.
- Fed Govt – only when earned through Body Corporate and not when as Body Politic.
What are points for AoP Taxation?
When is income in the hands of members exempt – Relevant sections S80,88,92,21(j),65,66, S98A, 98B, 98C
- Exclude share of Company from AoP’s income (if Co. member of AoP);
- make payments to members DNA of Salary, commission, PoD, brokerage, Others.
- When AoP has paid assessed tax, income in the hands of members exempt (i.e. will not be taxed again like dividend). However will be included in their taxable income for rate purposes only (divisible income i.e share after tax and other than FTR incoem of AoP)
When income of joint owners will be IFP & when IFB
- Rent=IFP not AoP.
- When Property is jointly owned, IFP & chargeable in the hands of owners as IFP & not IFB.
- Rental from P&M+building - IFOS
- Sales from P&M+building - AoP’s IFB
What happens if during the tax year, constitution of AoP is changed e.g members etc, who will file return? Whose liability to pay tax?
Return filing Liability– AoP (i.e. with members) at the time of filing of return
What happens if during the tax year, constitution of AoP is changed e.g members etc, Tax Calculation? & Tax recovery?
tax calculation according to entitlement of income at particular time (old);
Tax assessed not recoverable from a member can be recovered from AoP as constituted at the time of filing of return (new)
Tax (payment) Liability in case AoP discontinues business/dissolves S98B?
Every member at the time of dissolution and legal rep of deceased member shall be severally/jointly liable.
Succession to business (otherwise than on death) & Tax liability Generally and in the case of non-recovery?
- Predecessor – for year of succession upto date of succession
- Successor – after succession
- In case of non-recovery from predecessor – successor shall be liable not only for year of succession but for any previous years also
Is FTR income of AoP (distributed to memebers) included in members’ income for calculation of average rate of tax on members’ income
NO
AoP distributed NTR income to members where members have separate block of income (like IFP, Capital gain on securities, etc)
Will share from AoP will be included in members’ income for averate rate of tax for separate block of income?
No (for separate block)
AoP distributed Foreign Source income to a member who is NR
Will (FSI) share from AoP will be included in NR members’ income for averate rate of tax for separate block of income?
NO
Why is concept of averaging of income for member of AoP
If member would have directly earned that income (which he is earning through AoP) what rate of tax would have been applied
AoP distributed Exempt income to members
Will exempt income share from AoP will be included in members’ income for averate rate of tax?
No
What type of incomes received from AoP are not included in members’ income for average rate
FTR
Separate Block
Exempt
FSI for NR (only NR member)
Will share of AoP be considered for deciding rate of tax for members only or for other decisions/calculations also like deciding whether person is salaried/non-salaried; limits on expenses under ITO; tax credits limits etc
FOR TWO THINGS
- RATE CALCULATION
- TAX CREDITS U/s 61 (donation), 62 (inv. in shares), 63 (cont. to pension fund), 64 (deleted now from law)
for other decisions / calculations use actual taxable income (i.e. after removing exempt income which is share from AoP, as share of AoP on which tax paid by AoP is exempt in hands of members)
