Method of computing a member’s share in income of association of persons or body of individuals
[Section-309 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 309(1) of Income Tax Act 2025
309(1) For the purposes of this section, sections 310 and 311, an association of persons or body of individuals shall not include a company or a co-operative society or a society registered under the Societies Registration Act, 1860, or under any law corresponding to that Act in force in any part of India.
Section 309(2) of Income Tax Act 2025
309(2) In computing the total income of an assessee who is a member of an association of persons or a body of individuals wherein the shares of the members are determinate and known, the share of a member in the income or loss of such association or body shall be computed in the following manner,––
- 309(2)(a) any interest, salary, bonus, commission or remuneration, by whatever name called, paid to any member in respect of the tax year shall be deducted from the total income of the association or body and the balance ascertained and apportioned among the members in the proportions in which they are entitled to share in the income of the association or body;
- 309(2)(b) the interest, salary, bonus, commission or remuneration referred to in clause (a), shall be,—
- (i) added to the apportioned amount referred to in clause (a), if such apportioned amount is a profit; or
- (ii) adjusted against the apportioned amount referred to in clause (a), if such apportioned amount is a loss,
and the resultant amount shall be treated as the share of the member in the income of such association or body.
Section 309(3) of Income Tax Act 2025
309(3) The share of a member in the income or loss of the association or body, as computed under sub-section (2), shall, for the purposes of assessment, be apportioned under the various heads of income in the same manner in which the income or loss of the association or body has been determined under each head of income.
Section 309(4) of Income Tax Act 2025
309(4) Any interest paid by a member on capital borrowed by him for the purposes of investment in the association or body shall, in computing his share chargeable under the head “Profits and gains of business or profession” in respect of his share in the income of the association or body, be deducted from his share.
Section 309(5) of Income Tax Act 2025
309(5) For the purposes of this section, “paid” means actually paid or incurred according to the method of accounting upon the basis of which the profits or gains are computed under the head “Profits and gains of business or profession”.
FAQs on Section 309 of Income Tax Act 2025
What types of entities are excluded from the definition of an AOP or BOI under Section 309?
A company, a co-operative society, and a society registered under the Societies Registration Act, 1860 or any corresponding law in force in any part of India are excluded.
How is a member’s share in the income of an AOP or BOI computed when the shares are determinate and known?
The income is first reduced by any interest, salary, bonus, commission, or remuneration paid to members. The remaining amount is apportioned among members in their respective profit-sharing ratios. Then, each member’s share is adjusted by adding back the amounts received (in case of profit) or reducing them (in case of loss).
Is remuneration to members considered part of the share in income?
No, remuneration such as interest, salary, bonus, or commission paid to members is first deducted from the AOP/BOI’s total income before apportionment and then considered separately for inclusion or adjustment in the member’s share.
What happens if the apportioned amount results in a loss for the AOP/BOI?
If the apportioned amount is a loss, the member’s share in the loss is adjusted by reducing it with the remuneration received by that member, to determine the net share of loss.
How is the income under various heads of income apportioned to members?
The share of each member, once computed, is apportioned under various heads of income in the same manner as the income or loss was determined for the AOP or BOI.
Can a member claim deduction for interest paid on borrowed capital invested in the AOP or BOI?
Yes, any interest paid by a member on capital borrowed for investment in the AOP or BOI is allowed as a deduction while computing his share under the head “Profits and gains of business or profession”.
What does the term “paid” mean for the purposes of Section 309?
“Paid” means actually paid or incurred according to the method of accounting on which the profits or gains are computed under the head “Profits and gains of business or profession”.
Does Section 309 apply when the shares of members are not determinate or known?
No, Section 309(2) specifically applies only when the shares of the members are determinate and known. If not, this section is not applicable.
Are the deductions under Section 309(4) allowed under any head of income?
No, the deduction for interest paid on borrowed capital is specifically allowed only under the head “Profits and gains of business or profession”.
Is remuneration paid to a member always included in the member’s income?
Yes, the remuneration is added back to the member’s share in case of profit or adjusted against it in case of loss, to compute the total share of the member.
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