Share of member of association of persons or body of individuals in income of association or body

Section 310 — SHARE OF MEMBER OF ASSOCIATION OF PERSONS OR BODY OF INDIVIDUALS IN INCOME OF ASSOCIATION OR BODY

Section 310 of the Income-tax Act, 2025 corresponds to s. 86 of the Income-tax Act, 1961.

STATUTORY ARCHITECTURE

Section 310 governs how a member of an association of persons or body of individuals is taxed on his share in the income of the association or body, where that share is computed in the manner provided in s. 309. The general rule is that no income-tax is payable by the member on that share. The rule gives way in one case: where no income-tax is chargeable on the total income of the association or body, the member's share is chargeable to tax as part of his own total income. Where the general rule applies, inclusion of the share in the member's total income depends on whether the association or body is taxed at the maximum marginal rate or any higher rate.

KEY ELEMENTS

• Sub-section (1): income-tax is not payable by a member on his share in the income of the association of persons or body of individuals computed as provided in s. 309, except in the case referred to in sub-section (2).
• Sub-section (2): where no income-tax is chargeable on the total income of the association or body, the member's share computed as provided in s. 309 is chargeable to tax as part of his total income.
• Sub-section (3)(a): where no tax is payable under sub-section (1) and the association or body is chargeable at the maximum marginal rate or any higher rate, the share is not included in the member's total income.
• Sub-section (3)(b): in any other case, the member's share forms part of his total income.

CHANGES FROM THE 1961 ACT

The corresponding provision is s. 86 of the 1961 Act. The visible differences are:

• Section 86 of the 1961 Act excluded from its scope an association or body that was a company, a co-operative society, or a society registered under the Societies Registration Act, 1860 or a corresponding law. The exclusion is not repeated in s. 310, but it continues to apply through s. 309(1), which excludes those bodies for the purposes of ss. 309, 310 and 311.
• The two provisos of s. 86 of the 1961 Act have been rearranged into sub-sections. The second proviso (no tax chargeable on the association or body) is now sub-section (2), and sub-section (1) expressly carves it out. The first proviso (maximum marginal rate test) is now sub-section (3).
• The share is computed as provided in s. 309, in place of s. 67A of the 1961 Act.

The operative rules are otherwise substantively the same.

PRACTITIONER NOTES

• Start with the tax position of the association or body. If no income-tax is chargeable on its total income, sub-section (2) applies and the member's share is taxed as part of his total income; sub-section (3) does not come into play.
• In any other case the share forms part of the member's total income even though, under sub-section (1), no income-tax is payable on it.

CROSS-REFERENCES

• s. 309(1) — excludes a company, a co-operative society and a registered society from "association of persons or body of individuals" for the purposes of ss. 309, 310 and 311.
• s. 309 — the manner in which the member's share is computed, referred to in sub-sections (1) and (2).
• s. 86 and s. 67A of the 1961 Act — the corresponding provision and its computation reference.