What is an AOP?
An Association of Persons (AOP) is a body of two or more persons who come together for a common purpose with the intent of earning income, profits or gains. It is recognised primarily under the Income-tax Act 1961 (continuing under the Income-tax Act 2025) as an assessable entity, even though it is not separately registered under any statute. A Body of Individuals (BOI) is the closely related concept where the joiners are individuals only.
AOPs are common in infrastructure consortia (e.g., construction joint ventures bidding together), real-estate development arrangements, joint exploration ventures, and certain syndicated investments — where the collaborators want to keep their separate legal existence intact but pool resources for a defined revenue stream.
When an AOP is the right structure
The AOP is the right structure when:
- Two or more entities (companies, LLPs, individuals) want to bid for or execute a project jointly without forming a separate company or LLP.
- The collaboration is project-specific and time-bound — an EPC consortium for a road project, for example.
- Each member wants to retain its own books, balance-sheet identity and statutory standing.
- The members are willing to bear joint and several liability for tax on the AOP’s income.
If the collaboration is open-ended or expected to run beyond one or two projects, a Joint Venture Company or LLP is typically the better route.
Governing provisions & key features
The AOP is recognised under Section 2(31) of the Income-tax Act 1961 (and its successor under ITA 2025) as a “person” for tax purposes. Key features:
- Separate PAN under category “AOP”.
- Separate TAN if the AOP makes payments attracting TDS.
- Income tax return on Form ITR-5.
- Tax rate depends on whether members’ shares are determinate or indeterminate (Sections 167B, 86).
- GST registration in the AOP’s name when supplying taxable goods or services.
- No requirement of Memorandum or Articles — governed by an inter-member agreement.
How we set up an AOP
- Inter-member agreement — we draft the AOP agreement covering profit sharing, capital contribution, decision-making, project scope, dispute resolution and dissolution.
- PAN application — Form 49A in AOP category with the inter-member agreement attached.
- TAN, GST and bank account opened in the AOP’s name.
- Initial board / committee resolutions — signing authority, banking authority, statutory authorisations.
- Ongoing tax administration — quarterly TDS, annual ITR-5, transfer-pricing where applicable.
Documents we’ll ask for
- Certificate of incorporation / registration of every member entity.
- PAN of every member.
- Authorised signatory KYC for every member.
- Project description — scope, geography, expected revenue, duration.
- Capital contribution and profit-share arithmetic.
- Registered office address proof for the AOP.
How long it takes and what it costs
An AOP can be set up in 10–15 working days from a complete document set — the bottleneck is typically the inter-member agreement negotiation, which we drive on the client’s behalf with reference to the project. PAN allotment is 5–7 working days; TAN is faster. Indicative fee depends on the inter-member agreement complexity; we quote on the discovery call.
Frequently asked questions
Is an AOP taxed like a partnership firm?
Not exactly. If members’ shares are determinate and no member is taxable at the maximum marginal rate, the AOP is taxed at slab rates and members are not separately taxed (Section 86). If shares are indeterminate or any member is taxable at MMR, the AOP is taxed at MMR (Section 167B). We model this before structuring.
Can an AOP have a foreign company as a member?
Yes. The foreign member must comply with FEMA, obtain PAN, and the AOP must comply with TDS / WHT obligations on the member’s share. The structure may also attract permanent establishment risk.
Does the AOP need to be registered with the Registrar of Companies?
No. AOPs are not registered with the ROC. They are recognised by virtue of the inter-member agreement and registration with tax authorities (PAN, TAN, GST).
Can an AOP convert into an LLP or Pvt Ltd later?
Not directly. The members would need to incorporate a new LLP or company and transfer the AOP’s assets and contracts — subject to tax and stamp-duty implications, which we plan around at the structuring stage.
Talk to a partner.
A 30-minute call with a partner — no deck, no follow-up email blasts. Just a read on whether we’re the right team to structure your AOP.