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Association Of Persons (AOP)

Association Of Persons (AOP), Legal Entity & Requirements

Association of Persons (AOP), according to the Income Tax Act, 1961, is the integration of two or more persons for a common purpose, and primarily with an intention to earn some income. A person, in AOP terminology, can be a company or a body of individuals, whether or not incorporated.

Association of Persons includes a firm, a Hindu undivided family, any artificial juridical person and anybody of persons formed under a foreign law, but does not include a company.

What is AOP in Income Tax?
A firm is liable to pay tax at a flat rate. An Association of Persons (AOP) or a Body of Individuals (BOI), whether incorporated or not. An association of persons (AOP) under the Income Tax Act is an entity or unit of assessment. It means two or more persons who join for a common purpose with a view to earn an income.

What is AOP Firm?
Income Tax Act, 1961, defines AOP (Association of Persons) as an integration of persons for a mutual benefit or a common purpose. .The term person could include any association, body of individuals or company, irrespective of whether it is incorporated or not.

Is AOP a Separate Legal Entity?
An association of persons (AOP) or a body of individuals (BOI), whether incorporated or not, is treated as a ‘person’ under section 2(31)​ of the Income-tax Act, 1961. Hence, AOP or BOI is treated as a separate entity for the purpose of assessment under the Income-tax Act.

Is AOP Required to be Registered?
Persons must combine to engage in such a business, and the engagement must be under the combined voluntary will of the persons constituting the association. In a nutshell, an Association of Persons may apply to the association of persons that exists under the following conditions.

Is Audit Compulsory for AOP?
It is mandatory for an AOP/BOI to file return of income electronically with or without digital signature. However, an AOP/BOI liable to get its accounts audited under section 44AB shall furnish the return electronically under digital signature.

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