AOPs, BOIs and AJPs default to the new tax regime for AY 2026-27 and opt out only via Form 10-IEA

From assessment year (AY) 2024-25 the concessional regime under section 115BAC became the statutory default, and the Income Tax Department's own "Return Applicable" help page for AY 2026-27 confirms that the default now stretches well beyond salaried individuals. An association of persons (AOP, other than a co-operative society), a body of individuals (BOI) and an artificial juridical person (AJP) are each taxed under the new regime for AY 2026-27 unless they actively opt out. Because the switch is not made inside the return itself, an AOP that assumes it is "still on the old regime" and files without Form 10-IEA is computed on the new-regime slabs by default — often to its cost, and occasionally to its benefit. This guide walks through the statutory text, a worked Rs 22,00,000 example, the filing mechanics and the errors that surface during return processing.

What the Section Says

Section 115BAC(1A) of the Income-tax Act, 1961 sets a concessional slab structure as the default method of computation for an individual, a Hindu Undivided Family, an AOP (other than a co-operative society), a BOI, and an artificial juridical person referred to in section 2(31)(vii). The Income Tax Department's AY 2026-27 non-company help page states this plainly: the new regime is the default, and an eligible taxpayer "may opt for the old regime by filing Form 10-IEA before the due date". The default applies automatically — no election is needed to be taxed under it.

For AY 2026-27 (financial year 2025-26) the new-regime slabs, cited from the Finance Act 2025 amendment to section 115BAC, run as follows and apply equally to an AOP, BOI or AJP as they do to an individual:

On top of the slab tax, a 4% Health and Education cess is levied on the sum of tax and surcharge. Where total income crosses Rs 50,00,000 a surcharge applies, but note that the new regime caps the surcharge at 25% — the older 37% top surcharge rate does not operate under section 115BAC. These are the same rate parameters our income tax calculator applies.

The trade-off for the lower slabs is the surrender of most deductions and exemptions. An AOP or BOI computing under the new regime forgoes Chapter VI-A deductions (with the narrow carve-outs the section preserves, such as the employer's share under 80CCD(2) and 80JJAA) and the various exemptions that the old regime allowed against gross total income. If an AOP has heavy deductible outgo, the old regime can still win — but it must be claimed through Form 10-IEA, not merely assumed.

One frequent misreading: the section 87A rebate, which rises to Rs 60,000 in the new regime for FY 2025-26 where taxable income does not exceed Rs 12,00,000, is available only to a resident individual. It is not available to an AOP, BOI or AJP, and neither is the Rs 75,000 standard deduction, which attaches to salary income alone.

Worked Example

Take an AOP with determinate member shares and a total income of Rs 22,00,000 for FY 2025-26, formed for a joint construction project, where no single member's other income exceeds the basic exemption limit. Under the default new regime the slab tax builds up as shown:

Adding the 4% cess of Rs 10,000 gives a total liability of Rs 2,60,000. No surcharge arises because total income is below Rs 50,00,000.

Now compare the old regime, which the AOP could reach only by filing Form 10-IEA. On the general slab (Nil to Rs 2,50,000; 5% to Rs 5,00,000; 20% to Rs 10,00,000; 30% thereafter), the same Rs 22,00,000 attracts Rs 12,500 plus Rs 1,00,000 plus Rs 3,60,000 = Rs 4,72,500 of slab tax, and Rs 18,900 of cess, for Rs 4,91,400.

Staying in the default regime saves this AOP Rs 2,31,400. The old regime would only overtake it if the AOP could claim more than roughly Rs 7,70,000 of deductions against that income — which is why a joint venture with modest expenses almost always keeps the default. Model your own figures with the old vs new regime calculator and the new regime calculator before deciding whether opting out earns its paperwork.

Filing Form 10-IEA: the deadline that decides the regime

Form 10-IEA is the electronic form, prescribed under Rule 21AGA, through which an eligible taxpayer with income from business or profession opts out of section 115BAC to be taxed under the old regime — or later withdraws that option. It is filed on the e-filing portal and generates an acknowledgement number that must be quoted in the return.

The hard rule is timing: Form 10-IEA must be furnished on or before the due date for filing the return under section 139(1). For AY 2026-27 that due date is 31 July 2026 for a non-audit AOP and 31 October 2026 where the accounts are subject to audit under section 44AB. File it late and the opt-out fails; the return is then processed on the new-regime slabs regardless of intent.

For a taxpayer with business or professional income — which most AOPs and BOIs have — the switch is not free-flowing. Section 115BAC(6) allows such a person, having once opted out to the old regime, to withdraw that option and return to the new regime only once; after that withdrawal the old regime is closed to them for as long as they retain business income. An entity with no business income faces no such lock and may choose afresh each year in its return.

Common Mistakes

Assuming the AOP is still on the old regime by default. This is the single most common error since AY 2024-25. The Income Tax Department help page is explicit that AOPs, BOIs and AJPs default to the new regime for AY 2026-27; a return filed without a valid Form 10-IEA is computed on the new-regime slabs even if the books were kept expecting old-regime deductions.

Filing Form 10-IEA after the section 139(1) due date. The opt-out is time-barred. Furnishing the form even a day after 31 July 2026 (non-audit) or 31 October 2026 (audit) invalidates the election, and the deductions claimed in the return are disallowed on processing under section 143(1).

Claiming the standard deduction or the section 87A rebate for the AOP. Both belong to individuals — the Rs 75,000 standard deduction to salary earners and the Rs 60,000 (FY 2025-26) rebate to resident individuals with income up to Rs 12,00,000. Neither can be set against an AOP, BOI or AJP's income, and claiming them draws an adjustment.

Overlooking section 167B. Where the individual shares of members in an AOP or BOI are indeterminate, or where any member's total income (excluding the AOP share) exceeds the basic exemption limit, the AOP's income is charged not at slab rates at all but at the maximum marginal rate. That rate is the top 30% slab loaded with the new-regime surcharge (capped at 25%) and 4% cess — roughly 39%. In such a case the choice of regime is largely moot, and Form 10-IEA will not restore slab benefits.

Forgetting the once-only switch-back rule. An AOP with business income that opts out to the old regime and then reverts to the new regime has spent its single permitted switch under section 115BAC(6). Treating the regime choice as a year-on-year toggle, as an individual salaried taxpayer can, leads to a rejected Form 10-IEA in a later year.

FAQ

Does an AOP have to file anything to be taxed under the new regime?

No. Under section 115BAC(1A) the new regime is the default for an AOP (other than a co-operative society), BOI and AJP from AY 2024-25 onwards, and the Income Tax Department's AY 2026-27 help page confirms it. A form is required only to opt out to the old regime — Form 10-IEA — not to stay in the default.

What are the new-regime slabs for an AOP in FY 2025-26?

They are identical to the individual slabs: Nil up to Rs 4,00,000, then 5%, 10%, 15%, 20% and 25% in Rs 4,00,000 bands up to Rs 24,00,000, and 30% above Rs 24,00,000, plus a 4% Health and Education cess. There is no separate slab set for AOPs under section 115BAC.

By when must Form 10-IEA be filed for AY 2026-27?

On or before the section 139(1) due date — 31 July 2026 for a non-audit AOP and 31 October 2026 where audit under section 44AB applies. A late Form 10-IEA is invalid, and the return is processed under the default new regime.

Can an AOP claim the section 87A rebate of Rs 60,000?

No. The section 87A rebate, which is up to Rs 60,000 in the new regime for FY 2025-26 where taxable income does not exceed Rs 12,00,000, is available only to a resident individual. It does not extend to an AOP, BOI or AJP.

When is an AOP taxed at the maximum marginal rate instead of the slabs?

Under section 167B, when member shares are indeterminate or any member's other income exceeds the basic exemption limit, the AOP's whole income is taxed at the maximum marginal rate — the 30% top rate with surcharge (capped at 25% in the new regime) and 4% cess, about 39% — rather than at slab rates.

Can an AOP switch between regimes every year?

Only if it has no business or professional income. An AOP with business income may, under section 115BAC(6), withdraw an old-regime option and return to the new regime just once; thereafter the old regime is unavailable while it retains business income.

Where can I check my own liability under each regime?

Use Oquilia's income tax calculator and the old vs new comparison, which apply the FY 2025-26 slabs and the 4% cess. Always verify the final position against the return utility on incometax.gov.in before filing.

Sources: Income Tax Department, "Return Applicable" help page for non-company taxpayers, AY 2026-27 (incometax.gov.in); the Income-tax Act, 1961 as amended by the Finance Act 2025, section 115BAC and section 167B (indiacode.nic.in). Rates and slabs verified against Oquilia's central rate configuration on 27 September 2026.