Association of Persons (AOP) or
Body of Individuals (BOI)

Introduction

A firm is liable to pay tax at a flat rate. An Association of Persons (AOP) or a Body of Individuals (BOI), whether incorporated or not. An association of persons (AOP) under the Income Tax Act is an entity or unit of assessment.

The Body of Individual is a person under Income Tax Act. Then Association of Person is also a person under the I.T.Act. Often, the people get confused about the meaning of these two terms as overlapping with each other. The confusion also get more due to the fact that the Income Tax Act itself…

An association of persons (AOP) or a body of individuals (BOI), whether incorporated or not, is treated as a ‘person’ under section 2(31) of the Income-tax Act, 1961. Hence, AOP or BOI is treated as a separate entity for the purpose of assessment under the Income-tax Act. Here it is important to note that an AOP or BOI shall be deemed to be a person, whether or not, they were formed or established or incorporated with the object of deriving income, profits or gains.

An AOP means a group of persons (whether individuals, HUF, companies, firms, etc.) who join together for common purpose(s). Every combination of person cannot be termed as AOP. It is only when they associate themselves in an income-producing activity then they become AOP. Whereas, BOI means a group of individuals (individual only) who join together for common purpose(s) whether or not to earn income. Co-heirs, co-donees, etc. joining together for a common purpose or action would be chargeable as an AOP or BOI. In case of income of AOP, the AOP alone shall be taxed and the members of the AOP cannot be taxed individually in respect of the income of the AOP In case of income of AOP, the AOP alone shall be taxed and the members of the AOP cannot be taxed individually in respect of the income of the AOP