Indian income tax law | AOP and BOI

Section 67A Income Tax Act: Method of Computing a Member's Share in AOP or BOI Income

Section 67A of the Income-tax Act, 1961 prescribes how to calculate a member's share of profits or losses in an association of persons (AOP) or body of individuals (BOI) when the members' shares are known. For tax years beginning on or after 1 April 2026, the corresponding rule appears in Section 309 of the Income-tax Act, 2025.

Meaning and scope of Section 67A

An AOP is an association of persons assessed as such under the income-tax law; a BOI is a body of individuals. A determinate share means each member's entitlement to the income can be identified. The section excludes a company, a co-operative society and a society registered under the Societies Registration Act, 1860 or corresponding law.

The calculation applies whether the association or body earns a profit or incurs a loss. It determines the member's share; the separate rules governing whether that share is taxable in the member's hands must also be considered.

Section 67A(1): How a member's share is computed

Clause (a): Deduct payments to members and apportion the balance

First deduct any interest, salary, bonus, commission or other remuneration paid to members for the previous year from the AOP's or BOI's computed total income. Allocate the resulting balance among members according to their agreed or otherwise ascertainable income-sharing proportions.

Clause (b): Add the member's payments where the apportioned amount is profit

If a member's apportioned balance is positive, add that member's interest, salary, bonus, commission or remuneration received from the AOP or BOI. The result is the member's computed share.

Clause (c): Adjust payments where the apportioned amount is loss

If the apportioned balance is negative, adjust the member's interest, salary, bonus, commission or remuneration against that loss. The resulting positive or negative amount is treated as the member's share.

Illustrative calculation

Suppose an AOP has computed total income of Rs. 10,00,000, including Rs. 2,00,000 of remuneration paid to Member A. Members A and B share the balance equally.

This is a simplified example of the statutory allocation method, not a determination of the amount ultimately taxable in each member's assessment.

Section 67A(2): Allocation across heads of income

A member's computed share of income or loss is apportioned among the applicable heads of income in the same manner as the AOP's or BOI's income or loss has been determined under those heads. This distinction matters where the entity has more than one source or category of income.

Section 67A(3): Interest on borrowed capital

Where a member borrows capital to invest in the AOP or BOI, interest paid on that borrowing is deductible from the member's share chargeable under the head Profits and gains of business or profession, subject to the statutory conditions. It is not a general deduction against every type of income.

Explanation: Meaning of 'paid'

The Explanation adopts the meaning of 'paid' in Section 43(2) of the Income-tax Act, 1961, covering amounts actually paid or incurred according to the applicable method of accounting for business or professional income.

Taxability of the member's share: Section 86

Computing a share under Section 67A does not by itself mean it is taxable again in the member's hands. Under Section 86, the treatment depends on whether the AOP or BOI is taxable at the maximum marginal rate or a higher rate, at another rate, or is not chargeable to income tax. The applicable provisos determine exclusion from total income, inclusion for rate purposes, or taxation in the member's hands.

Corresponding law from 1 April 2026: Section 309

Section 309 of the Income-tax Act, 2025 carries forward the computation framework in reorganised form: subsection (1) specifies excluded entities; subsection (2) covers allocation and member payments; subsection (3) covers allocation among heads of income; subsection (4) covers interest on borrowed capital; and subsection (5) defines 'paid'. The related treatment of members' shares appears in Section 310, and the rules for indeterminate shares and certain tax-rate situations in Section 311.

For the authoritative wording, consult the official Income-tax Act, 2025 and the official text of Section 67A of the 1961 Act.

Frequently asked questions

Does Section 67A apply when members' shares are unknown?

No. Section 67A concerns known, determinate shares. Other charging provisions govern situations where shares are indeterminate or unknown.

Can the member's allocated share be a loss?

Yes. The statutory computation expressly accommodates profits and losses, including adjustment of member payments against an apportioned loss.

Is Section 67A still relevant after 1 April 2026?

Yes, for earlier tax years and proceedings preserved under the transitional provisions. For tax years beginning on or after 1 April 2026, consult Section 309 of the Income-tax Act, 2025.

Legislative history and official references

Section 67A was inserted by the Direct Tax Laws (Amendment) Act, 1989, with effect from 1 April 1989. For legislative background, see CBDT Circular No. 545 dated 24 September 1989. The statutory language and the law applicable to the relevant tax year should prevail over summaries and examples.