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Relationship of Individuals (ROI), in accordance with the (ITA) Income Tax Act, 1961, is an integration of multiple individuals for a widespread purpose and basically having an intention of earning a certain income. An individual, within the Relationship of Individuals (ROI) terms, may possibly be a corporation or a body of persons, whether or not integrated. A Relationship of Individuals (ROI) may possibly be formed exclusively of a contract.

A body of Persons (BOP) is in addition comparable to a Relationship of Individuals (ROI). On the other hand, in a Body of Persons (BOP), only two or extra persons can merge together having an intention of earning certain returns. Hence, (BOP) Body of Persons only as persons, while a Relationship of Individuals (ROI) could encompass officially authorized entities.

Taxation-Association of persons and Body of Individuals

The AOP or the BOI are evaluated thus; the first case is where the AOP or the BOI, of the personal share of a member, is intermediate or not known and the second case wherein AOP or BOI the share of each individual is determinate or known. Tax levy shall be charged on the overall amount of income of AOP/BOI at a “maximum marginal rate” if the personal share of such members AOP/BOI in part or whole of the income are unknown or intermediate. Incomes taxable at the special rate are exempted. Also, if the revenue of the AOP member is chargeable at a higher rate than marginal rate, the higher rate will apply on the overall revenue of AOP.

Individual shares of AOP/BOI members known

If the overall income of the AOP/BOI member exceeds the optimum Exemption Limit, that member with greater income will be levied at a maximum marginal rate @ 30% with extra surcharge @ approximately 11% as need may be, alongside with Cess at 3% such individuals overall income, without the income taxable @ special rate. Where none of the members collects income more than maximum exception boundary, the case may not be as stated.

Tonnage Tax system

The Government new invention in the tax system is the Tonnage Tax System (TTS) for taxing income derived through shipping activities of the Indian Company. This Tonnage Tax System is the optional scheme which is used to qualify an Indian shipping firm. It is only when certain conditions are satisfied can a firm be eligible for enrolment under this scheme.

Eligibility basis for the Tonnage Tax System

Every company ought to have at least a qualifying ship before such company could be eligible for Tonnage Tax Scheme, also the business for the qualification of the ship must be treated separately from the owner. There will be a maintenance of separate accounts whatsoever.

Owing to this, three criteria for the tonnage tax system are listed thus:

  • It must be a qualifying company
  • The firm operates ships
  • The firm operates qualifying ships or ship

A Qualifying Company

A qualifying firm/ company ought to be an Indian firm, with at least a qualifying ship which carries out a business that’s related to the qualifying ships. This firm will be headquartered at in India.

The company who owns this ship and whose head of the operation is in India by default is to be regarded as the operator. Whether the ship or its part is chartered by such firm, it still can be regarded as an operating ship except in the case of exception of it being chattered-out by the firm in the “bareboat charter cum demise” conditions, or on “bareboat charter” conditions for three years period or more years.

The Qualifying Ship

The qualifying ship satisfies the tonnage tax system by the following criteria’s:

  • Being a “seagoing ship” or “a vessel of 15 net tonnages” or more.
  • Being a ship which is registered legally under the “Merchant Shipping Act”, of 1958
  • If the ship is registered in another country other than India, the license must be issued by a director general for shipping
  • A ship ought to hold an active certificate indicating their net or tonnage.

    The gain from a company operating through a qualifying ship is not liable to the Minimum Alternative Tax Act. And any firm that opts for the scheme will not be allowed a set-off of loss or depreciation. Also, a firm could be expelled from involvement in the Tonnage Tax System under any situation, and therefore firms need to remit taxes if they are faced with loss or unforeseen events in the past years.



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