Charge of tax where shares of members in association of persons or body of individuals unknown, etc.
[Section-311 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 311(1) of Income Tax Act 2025
311(1) Where the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body are indeterminate or unknown,—
- (a) tax shall be charged on the total income of the association or body at the maximum marginal rate; or
- (b) where the total income of any member of such association or body is chargeable to tax at a rate which is higher than the maximum marginal rate, tax shall be charged on the total income of the association or body at such higher rate.
Section 311(2) of Income Tax Act 2025
311(2) Where the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body are determinate or known,––
- 311(2)(a) the total income of any member thereof for the tax year (excluding his share from such association or body) 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 shall be charged on the total income of the association or body at the maximum marginal rate;
- 311(2)(b) any member or members thereof is or are chargeable to tax at a rate or rates which is or are higher than the maximum marginal rate,—
- (i) tax shall be charged on that portion or portions of the total income of the association or body which is or are relatable to the share or shares of such member or members at such higher rate or rates, as the case may be; and
- (ii) the balance of the total income of the association or body shall be taxed at the maximum marginal rate.
Section 311(3) of Income Tax Act 2025
311(3) For the purposes of this section, the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such association or body or at any time thereafter.
FAQs on Section 311 of Income Tax Act 2025
What happens when the individual shares of members in an AOP or BOI are indeterminate or unknown?
When the individual shares are indeterminate or unknown, tax is charged on the total income of the AOP or BOI at the maximum marginal rate.
Is there any exception to the maximum marginal rate in such cases?
Yes. If any member’s total income is chargeable at a rate higher than the maximum marginal rate, then tax is charged on the AOP or BOI at such higher rate.
How is tax computed when the shares of members are determinate or known?
When the shares are determinate or known, tax is computed based on the individual tax status of members.
When is maximum marginal rate applied even when shares are determinate or known?
If the total income of any member (excluding their share from the AOP/BOI) exceeds the basic exemption limit under the relevant Finance Act, the AOP/BOI is taxed at the maximum marginal rate.
What happens if one or more members are taxable at rates higher than the maximum marginal rate?
In such cases, the portion of income relatable to such member(s) is taxed at their respective higher rate(s), while the remaining balance is taxed at the maximum marginal rate.
When are member shares deemed indeterminate or unknown for tax purposes?
Shares are deemed indeterminate or unknown if they are not clearly specified at the time of formation or at any time thereafter.
What is the significance of the formation date of the AOP or BOI in determining indeterminacy of shares?
If the shares are not clearly defined at the time of formation or at any subsequent time, they are deemed indeterminate for the entire period.
Does the tax treatment change if the shares become known after initially being unknown?
Yes, once the shares become known and are determinate, the computation may shift to follow the rules under Section 311(2) depending on members’ income and tax rates.
How is “maximum marginal rate” defined in this context?
It refers to the highest rate of income tax (including surcharge, if any) applicable to the highest slab of individual taxpayers as per the Finance Act of the relevant year.
Are these rules applicable to both resident and non-resident members of the AOP or BOI?
The provisions apply regardless of the residential status of the members; however, specific tax rates as per member’s status may influence computations under Section 311(2).
Refresh Page