Representations for reducing surcharge on Association of Persons to 10%/15%

Representations for reducing surcharge on Association of Persons to 10%/15%

August 4, 2020


Taxation & Accountancy

The Finance (No.2) Act 2019 increased the surcharge rate for individuals, Hindu Undivided Families (HUFs), Body of Individuals (BOIs) and Association of Persons (AOPs) as a measure to raise resources from ‘super rich’ taxpayers, from erstwhile maximum rate of 15% (for income above Rs. 1 Cr) to 25% (for income between Rs. 2 Cr to Rs. 5 Cr) and 37% (for income above Rs. 5 Cr).

Such increase has unintentionally adversely impacted AOPs formed by Indian companies for bidding and executing infrastructure projects. Infrastructure is the fundamental enabler for growth and has been identified by the Government as one of the five significant economic pillars for ‘Aatmanirbhar Bharat’ with a National Infrastructure Pipeline of Rs. 100 lakh crore. As AOP is a preferred mode of operation for several infrastructure companies which operate in India and abroad, higher surcharge on AOPs is counter-productive and adversely dampens the efforts to attract investments in the infrastructure space. AOP being a business entity, it seems a levy of higher surcharge intended for ‘super rich’ taxpayers is an unintentional anomaly which needs to be corrected.

Therefore, we request the Government to reduce the surcharge on AOPs to a level of 10%/15% as it was prior to enhancement by Finance (No.2) Act 2019. However, if a complete rollback is not possible, a specific carve out for infrastructure sector or relief to Indian Companies, in their capacity as member of AOP, by allowing their share of income in the AOP to be subject to surcharge rate applicable to Indian companies (i.e. 7% / 12%) instead of the enhanced surcharge rate for AOPs i.e. 25% / 37% may be considered.

A detailed representation on the issue is attached herewith for your kind consideration.

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