IT Act 2025
Section 310
IT Act 2025
Section 310
Share of member of association of persons or body of individuals in income of association or body.
310. (1) Income-tax shall not be payable by an assessee (who is a member of an association of persons or body of individuals) in respect of his share in the income of the association of persons or body of individuals computed in the manner provided in section 309, except in a case referred to in sub-section (2).
(2) Where no income-tax is chargeable on the total income of the association of persons or body of individuals, the share of a member computed as provided in section 309 shall be chargeable to tax as part of his total income.
(3) Where no income-tax is payable by an assessee under sub-section (1),––
(a) if the association of persons or body of individuals is chargeable to tax on its total income at the maximum marginal rate or any higher rate under any of the provisions of this Act, the share of a member computed as aforesaid shall not be included in his total income;
(b) in any other case, the share of a member computed as aforesaid shall form part of his total income.
Analysis
Section 310 – Share of Member of AOP/BOI in Income of Association or Body
1. Objective of Section 310: The core purpose of Section 310 is to avoid double taxation of the same income.
AOP/BOI income is first computed and taxed at the entity level (under Section 303 onwards and Section 309).
Once the AOP/BOI pays tax, the same income should not again be taxed in the hands of its members unless a specific exception applies.
This provision thus clarifies when a member’s share is taxable and when it is exempt, depending on whether the AOP/BOI itself is taxable and at what rate.
2. Key Definitions
AOP/BOI: A group of individuals coming together for a common purpose, such as a joint venture or temporary business project. Companies, co-operative societies, and registered societies are excluded (per Section 309(1)).
Member’s Share: The amount computed as per Section 309, which includes:
a. Profit-sharing ratio,
b. Adjustments for salary, commission, interest, etc., paid to members,
c. Apportionment across different heads of income.
3. Structure of Section 310: Section 310 has three sub-sections, each addressing a different scenario:
Sub-section Scenario Addressed Key Rule
310(1) AOP/BOI is taxable on its total income. Member’s share not taxed again in member’s hands.
310(2) AOP/BOI is not taxable Member’s share taxed in member’s (e.g., due to exemption or very low income). hands.
310(3) Determines inclusion/exclusion of share Clarifies whether share appears
when AOP/BOI is taxed at MMR or normal rates. in member’s total income or not.
4. Detailed Clause-by-Clause Analysis:
A. Section 310(1) – General Rule: No Double Taxation:
“Income-tax shall not be payable by a member in respect of his share in the income of the AOP/BOI computed as per Section 309, except in a case referred to in sub-section (2).”
Interpretation:
i. If the AOP/BOI has already been assessed and taxed on its total income,
members are NOT liable to pay tax again on their respective shares.
ii. Prevents double taxation of the same income.
Practical Example:
i. AOP total income = ₹12,00,000
ii. Tax paid by AOP @30% = ₹3,60,000
iii. Member A’s share = 60% = ₹7,20,000
→ This ₹7,20,000 will NOT be taxed again in A’s hands.
Rights of Taxpayers:
i. Members can claim full exemption of their share, provided proof of AOP’s taxation is available.
ii. Avoids duplicate tax liability.
Duties of AOs:
i. Confirm that AOP has paid tax before granting exemption.
ii. Ensure computation under Section 309 is correct and verifiable.
B. Section 310(2) – Exception: AOP/BOI Not Chargeable to Tax: “Where no income-tax is chargeable on the total income of the AOP/BOI, the member’s share shall be taxed as part of his total income.”
Interpretation:
i. If the AOP/BOI itself is not taxable because:
1. Total income is below the basic exemption limit, or
2. Entity is otherwise exempt under special provisions,
then the tax burden shifts to individual members.
ii. Prevents income from escaping taxation altogether.
Example:
i. AOP total income = ₹4,50,000
ii. Below the exemption limit for AOP → no tax payable by AOP.
iii. Member A’s share = ₹2,70,000 → taxed in A’s hands as part of total income.
Rights of Taxpayers: Members must include such income in their returns and can claim personal exemptions/deductions individually.
Duties of AOs:
i. Verify AOP’s tax status.
ii. Ensure that members correctly declare and pay tax on their shares if AOP was not assessed.
C. Section 310(3) – Special Rule for Maximum Marginal Rate (MMR): This sub-section distinguishes two situations based on the tax rate applied to the AOP:
Clause
When Applicable
Effect on Member’s Total Income
310(3)(a)
AOP/BOI taxed at Maximum Marginal Rate (MMR) or higher (e.g., indeterminate shares under Section 307).
Member’s share is not included in their total income, as full tax already collected at entity level.
310(3)(b)
AOP/BOI taxed at normal slab rates.
Member’s share included in their total income, but relief provided to avoid double taxation via credit mechanism.
Example 1 – AOP Taxed at MMR
i. Total AOP income = ₹15,00,000
Shares of members indeterminate → Section 307 applies.
AOP taxed at MMR = 42.74% = ₹6,41,100.
Member A’s computed share = ₹9,00,000 → NOT included in A’s return.
Example 2 – AOP Taxed at Normal Rates
i. Total AOP income = ₹10,00,000
Shares determinate → taxed at slab rates applicable to individuals.
Tax on AOP = ₹1,12,500 (assuming basic exemption applied).
Member’s share included in their return, but they get credit for their share of tax already paid by the AOP.
5. Rights and Duties:
(i) For Taxpayers (Members of AOP/BOI)
Rights
Duties
Claim exemption on their share of income if AOP already taxed under Section 310(1).
Maintain partnership/AOP agreements showing profit-sharing ratios and other relevant terms.
Claim deductions and exemptions when taxed individually under Section 310(2).
Disclose their share correctly in the return of income where applicable.
Avoid double taxation through proper documentation (e.g., assessment order of AOP).
Keep proof of tax paid by AOP to support exemption claim during scrutiny.
(ii) For Assessing Officers (AOs)
Responsibilities
Practical Steps
Ensure correct entity-level taxation first.
Verify AOP/BOI return and confirm whether tax was paid.
Prevent income leakage under Section 310(2).
If AOP not taxed, ensure members are assessed individually.
Correctly apply MMR rules under Section 310(3)(a).
Identify cases of indeterminate shares and apply maximum marginal rate.
Avoid double taxation.
Give members credit or exclusion based on AOP’s tax rate.
6. Interaction with Section 309:
i. Section 309 defines how to compute each member’s share.
Section 310 determines whether that share is taxed in the member’s hands or exempted, based on the AOP’s tax status.
Flow of Application:
i. Step 1: Compute total AOP income → Section 309
ii. Step 2: Determine if AOP taxable → Sections 303, 307
iii. Step 3: If AOP taxed → Apply Section 310(1) → No tax on members
iv. Step 4: If AOP not taxed → Apply Section 310(2) → Tax members individually
v. Step 5: If taxed at MMR → Section 310(3)(a) → Member’s share excluded
vi. Step 6: If taxed at slab rates → Section 310(3)(b) → Member’s share included with credit
7. Practical Challenges and Guidance:
Issue
Guidance
Ambiguity in profit-sharing ratios
AO should examine partnership deeds or other evidence; if indeterminate, apply MMR under Section 307.
Duplicate taxation risk
Taxpayers must maintain clear proof of AOP tax payment; AO must allow exclusion where applicable.
Incorrect head-wise allocation
Member’s share must match head-wise apportionment under Section 309(3).
Exempt AOPs
Members must be vigilant to declare their share under Section 310(2).
8. Summary Table:
Scenario
AOP Tax Rate
Taxable in Member’s Hands?
Applicable Provision
AOP taxed at MMR (e.g., indeterminate shares)
42.74% or higher
No, share excluded
310(3)(a)
AOP taxed at normal slab rates
Individual-like rates
Yes, included but relief for AOP tax paid
310(3)(b)
AOP not taxed (e.g., exempt or below threshold)
NIL
Yes, fully taxable in member’s hands
310(2)
9. Key Takeaways:
(i) No double taxation – income is taxed either at AOP level or member level, not both.
(ii) Members must know AOP’s tax status to report correctly.
(iii) AOs must verify documentation and apply MMR or normal rates accurately.
(iv) Section 309 and Section 310 work together:
i. Section 309 → computation of share,
ii. Section 310 → determination of tax liability.
10. Conclusion: Section 310 is a critical anti-double-taxation provision ensuring fair tax treatment of collective business entities like AOPs/BOIs.
i. For taxpayers, it provides clarity on when their share of income is exempt and when it becomes taxable individually.
For Assessing Officers, it lays down a clear framework to determine who bears the tax burden—the entity or its members—while preventing revenue leakage.
When correctly applied, it fosters transparency, compliance, and simplicity in the taxation of partnerships, joint ventures, and similar collective business structures.
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