Indian Income Tax Law | Updated October 2026

Section 174A Income Tax Act: Assessment of AOP, BOI and Artificial Juridical Persons

Q: What is the purpose of Section 174A?

It provides for accelerated assessment of an event-specific AOP, BOI or artificial juridical person likely to dissolve within the prescribed period.

Q: Which provision replaced Section 174A?

Section 318 of the Income-tax Act, 2025, which applies the procedural provisions of Section 317(2) to (6).

Q: Does Section 174A apply to every AOP or BOI?

No. The entity must be formed for a particular event or purpose and meet the statutory likely-dissolution conditions.

Section 174A of the Income-tax Act, 1961 provided a special accelerated assessment procedure for an association of persons (AOP), body of individuals (BOI) or artificial juridical person created for a particular event or purpose and likely to be dissolved soon. The corresponding provision is Section 318 of the Income-tax Act, 2025, applicable from 1 April 2026, subject to transitional and savings provisions.

Law update (October 2026): The Income-tax Act, 2025 uses a tax-year framework. Section 318 addresses likely dissolution in the same tax year or immediately afterwards. Section 174A of the 1961 Act remains relevant to periods and proceedings governed by the earlier Act under applicable savings rules.

What is Section 174A of the Income-tax Act, 1961?

Section 174A, inserted by the Finance Act, 2002 with effect from 1 April 2002, deals with assessment of an AOP, BOI or artificial juridical person formed, established or incorporated for a particular event or purpose. It overrides the ordinary timing rule in Section 4 where the Assessing Officer considers that the entity is likely to dissolve during the assessment year in which it was formed or immediately afterwards.

In such a case, income for the specified period up to the expected dissolution becomes chargeable in that assessment year. The procedural provisions of Section 174(2) to (6) apply, so far as practicable.

Meaning of AOP, BOI and artificial juridical person

Association of persons (AOP): Generally, a group of persons acting together for a common purpose or activity that may generate taxable income. Whether a particular arrangement is an AOP depends on its facts and the applicable legal tests.
Body of individuals (BOI): A grouping of individuals treated as a taxable person under the Act, depending on the character of their joint activity and income.
Artificial juridical person: A legal entity recognised as a person for income-tax purposes even though it is not a natural individual, company or other separately enumerated category. Classification depends on the legal constitution of the entity.
Assessing Officer (AO): The income-tax authority empowered under the Act to conduct assessment proceedings and determine tax liability.
Dissolution: The ending or winding up of the entity's existence or collective arrangement; the tax consequence depends on the governing statute, constituent documents and actual facts.

When can accelerated assessment apply?

The taxpayer is an AOP, BOI or artificial juridical person.
It was formed or established for a particular event or purpose, rather than necessarily for an indefinite duration.
The Assessing Officer has grounds to consider that it is likely to dissolve within the statutory period.
The income to be assessed relates to the period specified by the applicable provision up to dissolution.

The provision is not an automatic rule for every temporary collaboration or every entity that later dissolves. Its application turns on the statutory conditions and the Assessing Officer's proceedings.

Assessment procedure and taxpayer rights

Under Section 174A, subsections (2) to (6) of Section 174 apply, so far as may be. Those provisions deal with separate assessment of relevant periods, estimation where income cannot readily be determined, notices requiring returns, and the tax's relationship with other liabilities. In particular, the statutory notice procedure under Section 174(4) ordinarily provides a response period of not less than seven days.

Taxpayers should retain documents establishing the entity's constitution, event or purpose, receipts, expenses, bank transactions, tax deductions, distribution arrangements and actual date of dissolution. An estimate by the tax authority is not a substitute for examining the records and applicable procedural safeguards.

Income-tax Act, 2025: Section 318

Section 318(1) provides that where an AOP, BOI or artificial juridical person is formed for a particular event or purpose in a tax year and appears likely to dissolve in that same year or immediately after it, the total income from the first day of the tax year up to dissolution is chargeable in that tax year, irrespective of Section 4.

Section 318(2) applies Section 317(2) to (6), so far as may be, to these proceedings. Section 317 concerns assessment of persons leaving India and contains the related procedural rules, including estimation and notices.

Income-tax Act, 1961	Income-tax Act, 2025	Subject
Section 174A	Section 318	Accelerated assessment of event-specific AOP, BOI or artificial juridical person likely to dissolve
Section 174(2)-(6)	Section 317(2)-(6)	Procedural rules applied to the accelerated assessment
Section 4	Section 4	General charging provision overridden to the extent stated

Practical example

Suppose a group forms an AOP for a one-time cultural festival, receives sponsorship and ticket revenue, and plans to wind up after the event. If the statutory conditions are met and the Assessing Officer considers the AOP likely to dissolve within the relevant period, the tax authority may use the special assessment procedure rather than wait for the ordinary cycle. The actual taxable income, entity classification, deductions and rates still require determination under the applicable law.

Compliance checklist

Document the specific event or purpose and expected dissolution date.
Determine whether the arrangement is an AOP, BOI, artificial juridical person or another legal category.
Maintain event-wise books, receipts, invoices, bank records and tax-deduction certificates.
Respond to statutory notices within the specified period and retain acknowledgments.
Check whether the case falls under the 1961 Act or 2025 Act based on the applicable tax period and savings provisions.
Reconcile tax dues before distributing surplus or closing accounts.

Official legal references

Frequently asked questions

What is the purpose of Section 174A?

It enables assessment of income of an event-specific AOP, BOI or artificial juridical person that is likely to dissolve within the prescribed period, reducing the risk that tax cannot be assessed in the normal cycle.

Which provision replaced Section 174A in the 2025 Act?

Section 318 of the Income-tax Act, 2025. Its procedural cross-reference is Section 317(2) to (6).

Does Section 174A apply to every AOP or BOI?

No. It concerns entities formed for a particular event or purpose that meet the specified likely-dissolution conditions.

Is the notice response period at least seven days?

The incorporated procedural rules provide for a period of not less than seven days in the relevant return notice procedure, subject to the applicable statutory provision.

Disclaimer: General legal information only. The applicable law, entity status, assessment year or tax year and actual notice must be examined for individual cases.