The government’s proposal to cap the surcharge applicable to ‘associations of persons’ (AOP) related to consortiums or joint development agreements (JDA) at 15% is expected to provide tax relief to such real estate and infrastructure projects.
“In the globalised business world, there are several works contracts whose terms and conditions mandatorily require formation of a consortium. The members in the consortium are generally companies. In such cases, the income of these AOPs has to
suffer a graded surcharge up to 37%, which is a lot more than the surcharge on the individual companies,” finance minister Nirmala Sitharaman said in her budget speech on Tuesday.
According to Harry Parikh, associate partner-M&A tax and regulatory services, BDO India, the rationalisation of the surcharge on AOP can help the real estate sector which follows the AOP model with land aggregators and landowners who work as joint venture partners.