Taxability of apartments (aop)

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Sreenivas s kamath (Querist)
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09 February 2015 Our apartment is registered as an AOP which has 118 flats. We had not specified % of share of each member in ITR filed. Gross total income for AY 2012-13 is less than the basic exemption limit. But CPC letter was received for rectification stating that AOP should be taxed at MMR (Maximum Marginal Rate). Please guide me how to rectify the same so that AOP be taxed at normal slab rates.

Thanks in advance!!

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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09 February 2015 Where shares of members are indeterminate(under Section 167B)
The tax is charged on the total income of the AOP/BOI at the maximum marginal rate, which is the rate of tax (including surcharge, if any) applicable in relation to the highest slab of income in the case of an individual as specified in the Finance Act of the relevant year. However when any member is charged at a higher rate than maximum marginal rate, the income shall be taxed at a higher rate.
No option available for you to tax at normal rate.

Sreenivas s kamath

Sreenivas s kamath (Querist)
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10 February 2015 Thank You sir..

Am i supposed to give the name and %share of all 118 members (flat owners) in the ITR so that appartment be taxed at normal rates???

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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10 February 2015 Where shares of the members are determinate (under Section 67A)
The total income of an AOP/BOI wherein the shares of the members are determinate and known shall be computed as follows :

Any interest, salary, bonus or remuneration paid to any member of AOP shall be deducted from their total income.

The balance income (either profit or loss) shall be apportioned to the members, to which salary, interest, etc. shall be added. This income shall be treated as member's share in income of AOP.

The member's share so ascertained shall be apportioned under various heads of income in the same manner as it is done for AOP.

Any interest paid by member on capital borrowings for investment purposes in AOP shall be deducted from member's share while computing his income under the head profits and gains of business/profession.
The tax is chargeable on the total income of an AOP/BOI at the same rate as is applicable in the case of an individual.

But, when the total income of any member of the AOP/BOI for the previous year (excluding his share from the AOP/BOI) exceeds the maximum amount which is not chargeable to tax in the case of that member under the Finance Act of the relevant year, tax is charged on the total income of the AOP/BOI at the maximum marginal rate (i.e. the highest slab applicable to an individual).

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