Choosing the Right Legal Structure for Building Maintenance in India

Comparing AOP, RWA, CHS, AOA & MoU — Taxation, Costs, Compliance & Practical Timelines - - CA Surekha Ahuja

When a group of flat owners or tenants comes together to install a lift, undertake building repairs, or pool funds for common area maintenance, the legal structure they adopt becomes crucial. It affects not just how funds are handled, but also the tax implications, documentation, ability to engage with vendors, and the legal enforceability of decisions.

This guide presents a comprehensive comparison of the five major options available in India for managing shared residential responsibilities—from informal pools to registered housing societies.

 Legal Structures at a Glance

Structure	Nature	Legal Status	Common Use Cases	Registration Required?
AOP (Association of Persons)	Informal group with a common financial purpose	Recognized as a “person” under Income-tax Act	Lift installation, one-time repair, shared expenses	❌ Only a notarized deed
RWA (Resident Welfare Association)	Registered residents' society	Juristic person under the Societies Registration Act	Regular maintenance, vendor contracts, staff	✅
CHS (Co-operative Housing Society)	State-regulated housing co-operative	Legal entity under State Co-operative Acts	Full ownership, redevelopment, building governance	✅
AOA (Apartment Owners’ Association)	Flat owners' statutory collective	Legal entity under State Apartment Ownership Acts	Control and maintenance of common areas	✅
MoU Pool	Informal, one-time collection method	No legal identity	Small, low-value, short-term needs	❌

Income Tax Implications & Compliance

Structure	PAN & ITR Filing	Tax on Member Contributions	Tax on Other Income (e.g., FD interest)	TDS Deduction Required?
AOP	PAN mandatory; ITR if income > ₹2.5L	Exempt under mutuality	Taxable	✅ Yes (Sec 194C, 194A)
RWA	PAN + ITR-5 mandatory	Exempt under mutuality principle	Taxable if interest > ₹50,000	✅ Yes
CHS	PAN + ITR mandatory	Exempt	Taxable	✅ Yes
AOA	PAN + ITR mandatory	Exempt	Taxable	✅ Yes
MoU Pool	No separate PAN	Not governed	Taxable in members' hands	❌ No

Documentation, Cost & Operational Timelines

Structure	Key Documents	Estimated Cost	Timeline to Become Operational	Can Open Bank Account?
AOP	Notarized deed, PAN form, KYC	₹1,000–₹2,500	7–10 working days	✅ Yes
RWA	Bye-laws, MoA, member IDs	₹10,000–₹25,000	3–6 weeks	✅ Yes
CHS	Flat sale deeds, member data, resolutions	₹20,000–₹40,000	2–3 months	✅ Yes
AOA	Ownership records, AGM resolutions	₹15,000–₹25,000	4–6 weeks	✅ Yes
MoU Pool	Simple written agreement	₹0–₹1,000	Immediate	❌ No (uses personal accounts)

Key Legal References

Law / Ruling	Applicability
Sec 2(31) of the Income-tax Act	Defines AOP as a taxable person
Sec 139(1)	Income tax return filing mandates
Sec 194C / 194A	TDS on contractor payments / FD interest
CBDT Circular No. 7/2010	Mutuality for CHS and RWAs
SC: Bankipur Club, Chelmsford Club	Upheld doctrine of mutuality for societies

Choosing the Right Structure — What Fits Best?

Scenario	Recommended Legal Form
Lift installation, small repairs, short-term pooling	✅ AOP
Regular upkeep, recurring contributions, dealing with vendors	✅ RWA
You want long-term legal ownership of the property and control	✅ CHS
You want to manage the common areas as owners under law	✅ AOA
Tiny, one-time contributions with no formal arrangement	⚠️ MoU Pool (not advisable legally)

Conclusion

The structure you choose isn’t just a formality—it directly affects how funds are handled, how transparent operations are, whether tax exemptions apply, and if you can legally engage service providers or receive grants.

• For quick, one-time needs like installing a lift or repainting, an AOP is fast and cost-efficient.

• For recurring maintenance, hiring staff, or legal recognition, a RWA or AOA offers more legitimacy.

• For long-term governance and redevelopment, a CHS remains the gold standard.

Choosing wisely ensures peace of mind, tax compliance, and smooth collective decision-making.