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Section 318 Income Tax Act 2025: How Is a Temporary AOP, BOI or Juridical Person Assessed?

Section 318 permits income-tax assessment during the current tax year when an association of persons (AOP), body of individuals (BOI), or artificial juridical person established for a particular event or purpose is likely to dissolve during or immediately after that year.

Legal position: The Income-tax Act, 2025 came into force on 1 April 2026. Section 318 corresponds to Section 174A of the Income-tax Act, 1961. It provides a special timing rule for assessment; it does not automatically impose a separate flat tax rate.
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What does Section 318 provide?

Section 318 is titled Assessment of association of persons or body of individuals or artificial juridical person formed for a particular event or purpose. Its purpose is to enable the Assessing Officer to assess income promptly when an entity created for a limited event or objective may cease to exist before the normal assessment process is completed.

Section 318(1): Income chargeable in the current tax year

Despite the general charging rule in Section 4, where it appears to the Assessing Officer that a qualifying AOP, BOI or artificial juridical person is likely to dissolve in the same tax year or immediately after it, the total income from the first day of that tax year up to the date of dissolution is chargeable to tax in that tax year.

The rule concerns the timing of the charge and assessment. The taxable amount and applicable rate must still be determined under the other relevant provisions of the Act.

Section 318(2): Application of Section 317 procedures

Section 318(2) applies Section 317(2) to (6), so far as applicable, to proceedings under Section 318. Those provisions address accelerated assessment procedures, including estimation of income, notices and related procedural safeguards. Their application must be adapted to the circumstances of the particular entity.

When does Section 318 apply?

  1. The taxpayer is an AOP, BOI or artificial juridical person.
  2. It was formed, established or incorporated for a particular event or purpose in a tax year.
  3. It appears to the Assessing Officer that it is likely to be dissolved in that same tax year or immediately thereafter.
  4. The Assessing Officer proceeds under the special assessment mechanism, applying Section 317(2) to (6) as appropriate.

Important: A temporary project or event does not, by itself, conclusively establish that Section 318 applies. The entity's legal character, purpose, expected dissolution and the facts before the Assessing Officer matter.

How does the accelerated assessment work?

The Assessing Officer may take steps under the procedure incorporated from Section 317(2) to (6), to the extent applicable. These can involve estimating income for the relevant period, issuing the prescribed notice and completing the assessment without waiting for the ordinary assessment cycle. The taxpayer should maintain transaction records, receipts, expenditure details, bank statements and evidence of the proposed dissolution.

Any assessment must follow the statutory notice and procedural requirements. Section 318 should be read together with Section 317, rather than as a stand-alone assessment code.

Relevant statutory terms

Association of persons (AOP): A grouping of persons assessed as a unit where the applicable law and facts support that status. Merely working together does not settle the classification in every case.
Body of individuals (BOI): A collective of individuals that may be treated as a taxable person under the Act, depending on its constitution and activities.
Artificial juridical person: A legal person recognised for taxation that does not fall into the other specified categories of persons. Its precise status depends on the governing legal instrument and statute.
Tax year: The financial year used as the unit for computing income under the Income-tax Act, 2025.
Assessing Officer: An income-tax authority vested with jurisdiction to exercise the assessment powers of the Act, as defined in Section 2.
Dissolution: The legal termination or winding up of the relevant association, body or juridical person; mere inactivity is not necessarily equivalent to dissolution.

Practical example: Association formed for a single event

Suppose an AOP is established in May 2026 to organise a one-time exhibition and is expected to dissolve in February 2027. If the Assessing Officer considers that the conditions in Section 318 are met, income arising from 1 April 2026 up to the dissolution date can be charged in the 2026-27 tax year through the special mechanism. The actual taxable income depends on the receipts, allowable expenditure and other applicable provisions.

Distinction: Section 318 concerns an entity created for a particular event or purpose and likely to dissolve. Section 319 addresses a different situation: a person likely to transfer assets to avoid tax. Do not confuse the two.

Comparison with the Income-tax Act, 1961

Income-tax Act, 1961Income-tax Act, 2025
Section 174ASection 318
Cross-reference to Section 174 proceduresCross-reference to Section 317(2) to (6)

Frequently asked questions

Does Section 318 apply to every AOP?

No. The section specifically concerns an AOP, BOI or artificial juridical person formed for a particular event or purpose and likely to dissolve in the same tax year or immediately thereafter.

Does Section 318 create a special tax rate?

No. It principally establishes a special assessment timing mechanism. Applicable tax rates must be determined under other relevant provisions.

Can the Assessing Officer assess income before the ordinary assessment cycle?

Yes, where the statutory conditions are met, using the procedures incorporated from Section 317(2) to (6) so far as applicable.

What is the equivalent provision in the 1961 Act?

Section 174A of the Income-tax Act, 1961 corresponds to Section 318 of the Income-tax Act, 2025.

Official statutory references

For the current statutory text, consult the Income Tax Department's Income-tax Act, 2025 portal and its section correspondence navigator. These official links are provided as article sources, not navigation menu items.

Updated: 11 November 2026. This article is general legal information and should be read with the latest applicable legislation and facts of the case.