Chapter XVII - Special Provisions Relating to Certain Persons
Section 311
Section 311: charge of tax where members' shares are unknown
Section 311 sets the tax rate that applies to an association of persons (AOP) or body of individuals (BOI) itself, depending on whether the members' shares are known and on the members' own tax positions - ranging from the maximum marginal rate to a higher rate matching a high-income member.
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) Where the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body are indeterminate or unknown, tax shall be charged on the total income of such association or body at the maximum marginal rate, subject to the provision of sub-section (2).
(2) In a case referred to in sub-section (1) where the total income of any member of such association or body is chargeable to tax at a rate which is higher than the maximum marginal rate, tax shall be charged on the total income of the such association or body at such higher rate.
(3) Where the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body are determinate or known, and–– (a) where the total income of any member of such association or body for the tax year (excluding his share from such association or body) exceeds the maximum amount which is not chargeable to, tax shall be charged on the total income of the association or body at the maximum marginal rate; (b) where the total income of such association or body for the tax year chargeable to tax at a rate which is higher than the maximum marginal rate,— (i) tax shall be charged on that portion of the total income of association or body which is relatable to the share of such member at such higher rate; and (ii) the balance of the total income of such association or body shall be taxed at the maximum marginal rate.
(4) For the purposes of this section, the individual shares of the members of an association of persons or body of individuals in the whole or any part of the income of such association or body shall be deemed to be indeterminate or unknown if such shares (in relation to the whole or any part of such income) are indeterminate or unknown on the date of formation of such association or body or at any time thereafter.
Introduction
Section 311 sets the tax rate for an association of persons or body of individuals when member shares are unknown or known.
The maximum marginal rate generally applies to indeterminate shares, with higher-rate rules where a member or relevant income is chargeable at a higher rate.
Key takeaways
Unknown shares trigger higher rate
Where members’ individual shares are indeterminate or unknown, the association or body is generally charged at the maximum marginal rate or a higher applicable rate.
Known shares have separate rule
Where individual shares are known, the rate depends on the conditions concerning members’ other income set out in this section.
Shares indeterminate or unknown: maximum marginal rate (or higher)
Where the individual shares of AOP/BOI members in the whole or any part of its income are indeterminate or unknown, tax is charged on the AOP/BOI's total income at the maximum marginal rate - subject to the next rule.
If any member's own total income is chargeable to tax at a rate higher than the maximum marginal rate, tax is instead charged on the AOP/BOI's total income at that higher rate.
Shares determinate and known: rate depends on members' own income
Where the individual shares are determinate and known: if any member's total income for the tax year (excluding his share from the AOP/BOI) exceeds the maximum amount not chargeable to tax, tax is charged on the AOP/BOI's total income at the maximum marginal rate.
If the AOP/BOI's total income is chargeable to tax at a rate higher than the maximum marginal rate for the tax year: the portion of its total income relatable to that member's share is taxed at that higher rate, and the balance of the AOP/BOI's total income is taxed at the maximum marginal rate.
When shares are deemed "indeterminate or unknown"
For the purposes of Section 311, members' individual shares (in the whole or any part of the AOP/BOI's income) are deemed indeterminate or unknown if they are indeterminate or unknown on the date the AOP/BOI was formed, or at any time afterward.
Step-by-step flow for fixing the rate on an AOP or BOI under Section 311
- 1
Were the members' shares in the whole or any part of the income indeterminate or unknown on the date of formation or at any time after it?
Under Section 311(4), shares are deemed indeterminate or unknown if they were so on the date of formation or at any time thereafter.
- Yes: Go to step 2 (Section 311(1) and (2)).
- No, the shares are determinate or known: Skip to step 3 (Section 311(3)).
- 2
Shares unknown: is any member's total income chargeable at a rate higher than the maximum marginal rate?
Section 311(1) charges the whole total income of the association or body at the maximum marginal rate, subject to Section 311(2).
- Yes: Under Section 311(2), the whole total income of the association or body is charged at that higher rate.
- No: The whole total income is charged at the maximum marginal rate.
- 3
Shares known: does any member's own total income for the tax year, excluding the share from the association or body, exceed the maximum amount not chargeable to tax?
Section 311(3)(a) then charges the total income of the association or body at the maximum marginal rate. The bare text as published reads "maximum amount which is not chargeable to" and does not complete the phrase.
- 4
Shares known: is any member chargeable at a rate higher than the maximum marginal rate?
Under Section 311(3)(b), the portion of the total income relatable to that member's share is charged at the higher rate, and the balance at the maximum marginal rate.
- 5
Apply the rates
Section 311 does not state the maximum marginal rate or any higher rate. Take them from the rates in force for the tax year. How a member's share is worked out is dealt with in the related sections on members' shares.
Practical checklist
Do
- Document each member’s share and the date from which that share is determinable.
- Check whether any member’s tax rate triggers the section’s higher-rate rule.
Avoid
- Assume shares are determinate merely because a later distribution was made in fixed amounts.
Illustrative example
Worked example: an AOP with known shares and one high-rate member
Hypothetical facts (illustration only, not a real taxpayer): Three persons form an association of persons with shares fixed from formation at 50%, 30% and 20%. The AOP's total income for the tax year is an assumed ₹30,00,000. The member with the 20% share has other income which, it is assumed, is chargeable at a rate higher than the maximum marginal rate.
Shares known throughout
The shares were fixed on the date of formation and did not become unknown later, so Section 311(4) does not deem them unknown. Section 311(3) applies.
Portion for the high-rate member
Income relatable to the 20% share = 20% × ₹30,00,000 = ₹6,00,000. Under Section 311(3)(b)(i) this portion is charged at the member's higher rate.
Balance
Balance = ₹30,00,000 − ₹6,00,000 = ₹24,00,000, charged at the maximum marginal rate under Section 311(3)(b)(ii).
Contrast: shares unknown
If the shares had been indeterminate at formation or later, Section 311(1) and (2) would charge the whole ₹30,00,000 at the higher rate, because one member is chargeable above the maximum marginal rate.
Outcome
- ₹6,00,000 is charged at the member's higher rate and ₹24,00,000 at the maximum marginal rate.
- The actual rates come from the law in force for the tax year; Section 311 only decides which rate applies to which part.
Frequently asked questions
What tax rate does an AOP pay if its members' shares are unknown?
The maximum marginal rate under Section 311(1), unless a member's own total income is chargeable at an even higher rate, in which case that higher rate applies to the AOP's whole total income under Section 311(2).
Does a high-income member affect the AOP's tax rate even when shares are known?
Yes - under Section 311(3), if a member's own income (excluding his AOP share) already exceeds the tax-free threshold, the maximum marginal rate applies to the AOP's total income; and if the AOP is chargeable at a higher rate for the year, the portion relating to that member's share is taxed at that higher rate while the rest is taxed at the maximum marginal rate.
Need help applying this provision to your situation?
Get help with AOP/BOI tax rate assessmentLast updated 10 October 2026