PAN | Deed | Bank Account | TDS | ITR – Everything You Need to Know
When residents of a building want to jointly install a lift, fund maintenance, or pool contributions for shared infrastructure, setting up an Association of Persons (AOP) can be the most practical, low-cost, and legally recognized solution.
This guide walks you through the complete legal, tax, and procedural roadmap for forming and managing an AOP under Indian law.
What Is an AOP?
An Association of Persons (AOP) is an informal grouping of individuals with a common, non-commercial purpose. It is not a company or a society, but is recognized as a ‘person’ under Section 2(31) of the Income-tax Act, 1961, making it eligible to:
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Apply for a PAN
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Open a bank account
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File ITR
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Deduct and deposit TDS
🔍 Note: AOPs are ideal when there's no profit motive and activities are based on the principle of mutuality.
Common Use Cases for an AOP
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✔️ Installing a lift
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✔️ Building or roof repairs
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✔️ Repainting common areas
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✔️ Collective payment to contractors
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✔️ Temporary collaborative works among tenants
✅ No need to register as a society or co-operative.
✅ No Registrar filings, resolutions, or complex approvals.
Step-by-Step Process to Form an AOP
1. Draft a Simple AOP Deed
Include:
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Name of AOP (e.g., “ABC Residency AOP”)
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Purpose (e.g., lift installation, waterproofing)
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Names, addresses, and signatures of members
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Contribution details (equal or fixed share)
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Operation clause for bank account (e.g., 2 signatories)
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Mutuality clause (no profit, only cost-sharing)
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Date and Notarization (recommended but not mandatory)
2. Apply for PAN (Mandatory)
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File Form 49A (online or through agent)
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Submit:
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AOP deed
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Proof of address (e.g., utility bill of a member)
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KYC documents of at least 2 managing members
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PAN is usually allotted in 7–10 working days
3. Open a Bank Account
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Submit:
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PAN of the AOP
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Notarized deed
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KYC of authorised signatories
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Bank account will be titled: “ABC Residency AOP”
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Minimum: Two authorised signatories
4. Operate Account & Comply
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Collect contributions from members
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Make payments to contractors/vendors
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Deduct and deposit TDS (if applicable)
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Maintain payment records and vendor invoices
5. Income Tax Filing
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File ITR-5 if AOP’s income (e.g., interest, discounts) exceeds ₹2.5 lakh
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Member contributions used purely for mutual benefit are not taxable
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However, interest income (e.g., on FD) is taxable in the hands of AOP
6. TDS Compliance (if applicable)
| Nature of Payment | Section | Threshold | Rate |
|---|---|---|---|
| To contractor/vendor | Sec 194C | ₹30,000 per payment | 1% / 2% |
| On FD interest | Sec 194A | ₹5,000 per year | 10% |
Legal & Tax Summary
| Particular | Requirement |
|---|---|
| AOP Defined | Sec 2(31) of Income-tax Act |
| PAN Application | Form 49A + Deed + KYC |
| TDS Obligations | Sec 194C, 194A |
| Income Tax Return (ITR-5) | Mandatory if income > ₹2.5L (excluding mutuality) |
| Tax on Contributions | Exempt under principle of mutuality |
| Tax on Interest Income (FD, etc.) | Taxable |
| GST Applicability | ❌ Not applicable unless commercial activity |
Pros and Cons of AOP Structure
| ✅ Pros | ❌ Cons |
|---|---|
| Quick & low-cost setup | Not suited for long-term governance |
| No need for registration | Cannot enforce bylaws like a society |
| Legally recognized for PAN & banking | Interest income taxable |
| Ideal for short-term works | No structured dispute resolution |
Caution & Compliance Tips
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❗ Always operate through the AOP bank account—never use personal accounts
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❗ Keep purpose strictly mutual and non-commercial
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❗ Avoid generating surpluses; interest income is taxable
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❗ Keep deed precise and dated; notarize for evidentiary value
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❗ Maintain basic expense records for transparency
Final Word
If you're managing a one-time or short-term building project, forming an AOP is the most efficient legal structure—fast, tax-compliant, and cost-effective. It enables banking, tax deduction, and vendor payments without the bureaucratic complexity of registering a society or cooperative.
For ongoing management, elections, and legal recognition under housing laws, consider setting up a Resident Welfare Association (RWA) or an Apartment Owners’ Association (AOA) instead.
