Section 67A of ITA, 1961 : Section 67A: Method Of Computing A Members Share In Income Of Association Of Persons Or Body Of Individuals

Explanation using Example

Imagine a scenario where a group of four friends form an investment club, which is an association of persons (AOP), to invest in the stock market. They agree to share profits and losses based on the amount they each invest. At the end of the financial year, the AOP earns a profit of $100,000. However, the AOP also pays a salary of $10,000 to one of the members, Alex, for managing the investments.

Under Section 67A of the Income-tax Act, 1961, the AOP's total income is first reduced by the salary paid to Alex, leaving a balance of $90,000. This balance is t...

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