1. As a Member of Hindu Undivided Family.
Any sum received by an individual as a member of H.U.F. out of family income is not to be included in his total income, because the share of income received from the H.U.F. is exempted in the hands of such individual, the family may or may not have paid tax on that income [Section 10 (2)1.
If the member earns his own income, besides being the member of H.U.F. he will pay tax on his own earned income.
But u/s 64 (2) where an individual converts his individual property into the common pool of H.U.F. of which he is a member, income from such property shall be included in his individual income.
2. Income Received as Share from AOP.
The share from AOP is treated in following manner:
- Compute total income of AOP.
- Where Share of Members of AOP are determined
(i). How to Compute Taxable Income of an AOP/BOI
First find out the taxable income of the AOP/BOI under the following steps:
Find out income under the different heads of income (viz., “Income from house property”, “Profits and gains of business or profession”, “Capital gains” and “Income from other sources”, ignoring incomes exempt under sections 10 to 13A.
Make adjustments on account of brought forward losses/allowances. The total income under the aforesaid heads is “Gross total income”.
From the “gross total income” make deductions under sections 80G, 80GGA, 80GGC, 80-I, 80-IA, 80-IB, 80-IC and 80JJA.
The balancing amount is total income or taxable income.
(ii). Where Shares of Members are Determinate –
Tax liability is determined as under:
(A). If none of the Member of the AOP / BOI has income in Excess of the Maximum Amount which is Not Chargeable to Tax in the hands of Members –
In this case, tax is chargeable on the income of the AOP/BOI at the same rate as is applicable in the case of an individual.
(B). If Any Member Of The AOP/BOI Has Income In Excess Of The Maximum Amount Which Is Not Chargeable To Tax-
In such case, tax will be chargeable at the maximum marginal rate (i.e., 35.535 % for the assessment year 2018-19 and 35.88 % for the assessment year 2019-20).
3. As a Partner of Firm Assessed as Firm Assessed u/s 184.
The share received by an individual from a firm shall not he included in his total income irrespective of the fact, whether the firm has paid the tax or not. Any salary or other remuneration and interest on capital is taxable under the head Profits and Gains to the extent above remuneration and interest are allowed as deduction to the firm.
4. Share of income from firm assessed u/s 185.
Share of income received by a partner from a firm which has been assessed to tax u/s 185 as it has not submitted a copy of its instrument of partnership is fully exempted u/s lO(2A). The following sums received by partner from such firm shall also he exempted in the hands of the partner
(a) Any remuneration, bonus, fees, commission etc.
(b) Interest on loan/capital from such firm.
Note. The above exemptions are applicable because firm covered u/s 185 is not allowed to charge these items as expense.
5. As a Shareholder of a company.
The gross amount of dividend received by an individual is to he included in his total income. The gross amount means, the net dividend received plus tax deducted at source. The shareholder is liable to pay tax on whole of his income from dividend i.e., the gross amount of dividend declared by the company. The assessee shall get credit of the tax deducted at source out of his final tax liability. The individual shall be entitled to the deduction as provided by the different sections of Income-tax Act.
With effect from assessment year 1998-99 dividend received from or declared or distributed by an Indian company on or after 1-6-97 shall he fully exempted and shall not form part of total income.
Note. Dividend from foreign company is fully taxable as income from other sources.