• May
  • 22
  • 2012

Taxation of Co-operative Housing Societies (CHS) & Income Tax Return

In general the perception is that income of Co–operative Societies is not chargeable to tax and therefore many societies do not bother to take PAN No. & file Income Tax returns. This is a wrong perception since though certain types of income of CHS are exempt there are other incomes which are chargeable to Tax.

We now examine on a case by case basis the income which is normally earned by a Co – Operative Society’s:

a) Contribution from Members:

This are the most commonly credited accounts in profit &loss account of    any CHS. They are credited under different heads namely Maintenance charges Municipal Taxes, Electricity Charges, Lift Maintenances Charges, Water Charges etc.

It may be emphasized that the society merely acts as an agent who collects this charges on behalf of members & spends the same to meet the various joint expenses of the society. Any surplus generated due to these types of income is not chargeable to tax as it is exempt based on the ‘concept of Mutuality’. The basic principle of Mutuality is a mutual association arises when persons forming a group; associate together for a common object and contribute money for achieving that object and divide the surplus amongst them in the character. The cardinal requirement in case of mutual association is that “All the contributors to the common fund must be entitled to participate in the surplus & all the participators to the surplus must be contributors to the common trade. In other words there should be complete identity between the contributors and the participators.

b) Interest Charged on member Outstanding:

Interest charged by society on outstanding dues of members again forms a part of contribution from members. Moreover it qualifies the test of mutuality since the contributors & participators are the same persons. Thus this is also exempt on concept of Mutuality.

c) Interest Income Earned on Investments:

Interest income earned can be further classified into interest earned from investments made in Co-operative Banks & interest from other Investments. Interest earned from any investment made in Co-operative Banks qualifies for deduction @ 100% under section 80P(d). However other interest income on investments is fully taxable.

d) Dividend:

Dividend income received from Indian Companies is fully exempt u/s 10 (34). Dividend received from Co-operative Banks qualifies for exemption under 80P(d) is therefore 100% deductible.

e) Rental Income from Advertisement Hoardings :

This is fully taxable under the head Business Income / Income from other sources. However expenses which can be directly attributable to earning of this income can be claimed against this income on a proportionate basis.

f) Rental from Mobile / Cable Towers etc :

Rental from mobile & Cable Towers is taxable under the head Income from House Property; considering the same it is eligible for standard deduction u/s 24 (a) @ 30 % of the rent. Also if society has borrowed capital to construct said building in which the tower has been erected than a proportionate deduction can be claimed for interest paid on borrowed capital.

g) Rentals from use of open Spaces / Terrace :

If the Rentals are received for use of open ground or terrace the point be noted is whatever it is received from Members or Non-members. If it is received from Members than it can be argued that it is not taxable on the grounds of “Mutuality”. If it is received from Non-members or outsiders it shall be fully taxable under the head Income from House Property & will qualify for deductions as mentioned earlier.

h) Non –Occupancy Charges :

Though non – occupancy charges are being collected from members in their periodic Bills the income tax departments view point has been that this amount is received from a members who has not been staying in the premises of the society. Therefore though he is a contributor he is not enjoying the amenities of the society is thus not a participator. Considering the same the mutuality concept is not satisfied & therefore this income is chargeable to tax.

However this view point is debatable and can always be argued in society’s favour as in some of the courts case’s the ruling given is that “While comparing the contributors and participators in concept mutuality they should be compared as a class an not isolated or individual contributors”.

i) Parking Charges : Again in this case the point to be seen is whether the collections are from members or Non – members. In case of collections from members they are covered by concept of Mutuality. However in case of Societies having shopping complexes parking charges collected from outsiders would be taxable.

We have covered most of the incomes likely to be earned by Co-operative Housing Society. However we have not touched upon Transfer fees as it is requires to be discussed at length & will be covered in a separate article. Moreover it may be hereby specified that all CHS earning business income qualify for a general deduction under section 80 P(2)(c) of Rs. 50000/-.This deduction can be claimed against business income and not against interest or any other income.

Also we may hereby emphasize that since most of the incomes of societies can fall in tax net it is compulsory to file Income tax return. Also if society is not having taxable income due to deduction available u/s 80 P(d) (i.e. interest from Co-operative Banks being exempt) it is imperative on the part of the society to prove the same and this can be done only if Income Tax return is filed. Thus it may me said in conclusion that it is compulsory on the part of CHS to filing Income Tax returns regularly.

Further the societies are taxed as per the following slab: _

Income upto   Rs 10000                                     10 %

Income upto   Rs 20000                                     20 %

Above 20000/-                                                  30 %

The income tax as arrived above has to be increased by 3 % of tax payable towards Education Cess and Higher education Cess.


50 Responses to “Taxation of Co-operative Housing Societies (CHS) & Income Tax Return”

  1. chandra prakash jain says:

    Sir

    Societies are charging allotment for parking slot from members & but they are charging hefty amount in the name of development account

    is it legal

    please inform me

    with regards

  2. Prakash Andhare says:

    1. Is a co-op housing society required to pay dividend to its members on the Share money of Rs. 250/- ?

    2. Is it mandatory to circulate the Audit Report to the members of a co-op housing society ?

    3. Is it mandatory to circulate the schedules to Annual Accounts to all members of a co-op housing society ?

    The co-op housing society is in Maharashttra

  3. G Menon says:

    cud you pls advise whether the transfer fees charged by the CO OP HOUSING SERVICE SOCIETY (in this case Rs 300000) from the new member when the house is purchased under resale, is subject to tax.

    this being the first case in our society, we seek your valuable guidance.

    the society is located in Ahmedabad (Gujarat) and registered under the society act.

    awaiting your valuable guidance on this.

    rgds

  4. shah says:

    Is tender fees received for redevoplment purpose chargeable to tax?

  5. shah says:

    Is tender fees received by society for redevelopment chargeable to tax?

  6. ramesh says:

    Category of pan for co.op.housings society

  7. Pranabjit Sahoo says:

    Very useful information for Treasurer/Fin Secy. of housing societies. Thanks

  8. dilawar.m.attar says:

    let me know the mode of income tax payment to be paid by the housing society on the rental income from tower

  9. Vijay Agarwal says:

    Pls provide the information regarding filing of Income Tax return is compulsory for Co-operative societies.

  10. C K SUKHATHANKAR says:

    I have to apply for PAN for our Hsg Society. Under which category should I apply – Association of Persons or Body of Individuals?

  11. bhavik mehta says:

    send me excel base housing soc compution of income

  12. sandeep says:

    send me excel base housing soc compution of income

  13. sandeep says:

    pls send me excel format of income tax calculation of housing soc

  14. ajit says:

    Pls send detail Co-operative societies Transfer fees, entrance fees,is taxble

  15. ajit says:

    Pls send me information regarding Co-operative societies Transfer fees, entrance fees, whether it is taxable?

  16. sandeep says:

    please send me format of computaion of income in excel of housing societies.

  17. sandeep says:

    Please send me format of computaion of income in excel of housing societies.

  18. mahendra jain says:

    is cooperative housing society registered under Maharashtra cooperative societies act 1960 eligible to open a savings account ?

  19. LEO says:

    can society issue share certificate to member who had taken housing loan from bank agaINST PROPERTY

  20. Laxman Parab says:

    Please Can u send format of computaion of income in excel of housing societies.

  21. D.B.CHAKRABORTY says:

    Payment made by members of CHS for painting/colouring/repairing etc are taxable
    income of CHS.Probably it sh.come under the concept of MUTUALITY.Kindly confirm
    by mail.
    Respects,
    Dilip

  22. Chandru says:

    What is the Status in pan card application for Register under Societies Registration Act-1860 Please Send me Urgent (Khadi Gramodyog Sangh)

  23. mahendra bhujang` says:

    pl. let me know if interest on S/B. account of a op-op. hsg. society recd. is taxable ?

  24. meenal says:

    Please give income tax sections to support the contents of this article.

  25. D S SHAH says:

    Sir
    Pl guide who has to sign Coop Hou Society REturn. By President or Secretary or Treasurer ??
    Pl reoly

  26. vysakh says:

    please help. is co operative housing societies coming under the control of rbi ? or just the state govt? kindly reply ASAP. thanks in advance

  27. S.K.JHANWAR says:

    Maintenance charges collected by CHS is used in cultural program or pooja .

    Thanks

  28. Amit Malaviya says:

    Please tell me when a registered housing society is annually giving the income and expenditure account details showing the expense under the heading of depreciation where does this amount utilized by them in practical/real as and when the individual is showing expense under the head of depreciation it is in real indirect profit of the assesse which claimed under the expemption heading depreciation. But how does it account in the case of housing society and where does it reflects in real/practical because after claiming the expense of depreciation society shows that there is deficit in the income and expenditure account in F.Y.11-12 i.e. A.Y.12-13. My point is that when there is not the real expense of depreciation than how to derived the real deficit or whether it is profit in the society account? Please reply me urgently I am very confused on this fact and want to arguing in the society A.G.M. as they want to increase the maintenance charges as it is recommended by the auditor that in future this deficit situation doesn’t comes and face by society managing body.

  29. sanjay says:

    I would like to know on which bill as a housing society we should deduct TDS and what rate

  30. Satish says:

    Hi,

    Can some one tells me what is the tax treatment for the following:

    1. Receipts of funds from builder for purchase of specific assets.
    2. Receipts of Gys. chages, club charges from outher member.
    3. Interest received from scheduled or nationalise bank.

  31. CHANDAN MISHRA says:

    DEAR SIR,

    PLEASE DETAIL ME CO.OP. HSG SOC IS INTEREST INCOME FROM CO.OP. BANK SO PLEASE THOUGHT IS TAXABLE / NON TAXABLE SO PLEASE URGENT BASE PLEASE DETAL PROVIDE ME.

    THANKS

  32. b l mangle says:

    which form number is necessary to file housing societies tax written

  33. kamlesh vyas says:

    please provide the information regarding co-oprative housing society,s examtion certificate and please tell us which form is applied for examtion certificate of co-oprative housing society.

  34. kamlesh vyas says:

    co-oprative housing society’s i want income tax tax exemtion certifacate for co-op hou soc. so in which form i would apply for examtion certificate

  35. pravin says:

    very useful…many of us don’t know about CHS tax process.

  36. John Lindsay says:

    If the Co-op has an excess of revenues over expenses, is any of that taxable? I’ve learned from part of the article that outside funds, parking, etc are taxable but what if the excess is in the millions of dollars over the past several years? The idea was to create a reserve on the books for a catastrophe but no reserve has been booked. Excess monies are being transferred to “paid-in-capital” is that correct? Any advice is very appreciated.

  37. BR Agarwal says:

    Yes, it TDS has to be deducted on all kinds of maintainance contract.

  38. shashi deewane says:

    I haave the same question as Ms. Shalaka has that Whether a Co-op Housing Society is required to deduct a tax on the payments made to Contractors for painting of building etc?

  39. bhuvana says:

    whether tds applicble for the Maintainence charges received by the CHS ..?? if yea menton the section to

  40. Ganesh K says:

    All Deposits made with co-op societies by other co-operative society are exmenpt Mr. yahwant. Pls refer to Section 80P(2)(d) of IT Act 1969.

  41. yahwant says:

    Interest received from MMRDA-SRA (Deposit on co-op societies it is taxable or not? Interest received after deduction of tds. please reply & under section

  42. SUBHASH SAWANT says:

    whether a cooperative housing society is required to deduct income tax un the payment made to contractors for painting of building etc.

  43. Sudhindra says:

    Nice comphensive and very useful article

  44. Trupti says:

    Very useful article. Almost all areas of income are considered. Got an insight about what is expected by the dept.

  45. pl .kindly guide & revert says:

    1.Pl guide what rate is the non occupancy charges to be paid.

    2.Case a family evicited without court Notice , balif & threat of bombay police & when free shelter give is the Land Lord charged Tax for non ocupancy & the State government decides the amount calculated.Kindly revert.
    3what rate is the nonoccupancy calculated is it 41.5 or 300% on annual collection at bombay

  46. Anil Kolte says:

    Interest recd from MHADA (Deposit on Co-op HSG Society) it is taxable or not? Interest recd after deduction of TDS. plese Reply?

  47. Shalaka Solase says:

    Whether a Co-op Housing Society is required to deduct a tax on the payments made to Contractors for painting of building etc?

  48. Nilesh says:

    It is amazing one, it covers all the aspects / inocome part of the societies.
    Thanks a lot.

  49. anand sawant says:

    Interest recd from MHADA(SRA),Wheter it is taxbale income of the society?

  50. Bhaduri says:

    Pls provide the information regarding Co-operative societies Transfer fees, entrance fees, whether it is taxable?

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