Govt Likely to End Exemption for AOPs on Filing Income Tax Returns

The government is considering a proposal that all Association of persons (AOPs), irrespective of their income, may be required to file their returns. According to sources, AOP is treated a separate person from its members for tax purposes like a company. However, the compliance requirements are too low as compared to corporate bodies and is prone to misuse and discourages corporatization. Currently, AOPs having below taxable income are not required to file return of income whereas all corporate bodies, irrespective of their incomes are required to file returns. Further under the present tax regime, the AOPs are not required to file audited accounts along-with returns of income. The AOP is a taxable entity and income distributed by an AOP to its members is exempt. In order to enhance documentation, it is proposed that AOPs having turnover of Rs. 100 million or above may be required to file audited financial statements. Non-compliance would render the share income taxable in the hands of members of AOP too. For live updates on everything about the Federal Budget, visit this link.