Benefits of Producer Company

Article explains benefits of producer Company, What function does the Farmer Producer Company play?, What are the advantages of forming a Farmer Producer Company in India? What are the advantages of joining the Farmer Producer Company?, In India, what are the tax advantages for a farmer-producer company? and a summary of benefits of producer Company.

What function does the Farmer Producer Company play?

A farmer producer company is a group of farmers that band together to increase their revenue and enhance their standard of life. In India, a Producer Company can be formed with merely 10 members and two institutions. In India, more than 80% of farmers are unorganized and have tiny or marginal holdings. Farmer Producer Company encourages farmers and assists them in reaching their economic potential by pursuing the following goals:

• Production
• Procurement
• Harvesting and Grading of Fruits and Vegetables
• Handling and Poling
• Agricultural product marketing
• Selling, exporting and importing agricultural products.

Only if it is created by a group of producers for their farm or non-farm operations will it be defined as a Farmer Producers Organization or Producer Company. It’s a legal entity and a registered body; the company’s producers are the organization’s shareholders; the company deals with business activities related to the production of primary produce; the company looks after the needs of the members and works for their benefit; profit portions are shared among the producers, and the balance is made within the share capital or reserves.

What are the advantages of forming a Farmer Producer Company in India?

The Producer Company’s major goal is to establish a farmer society in the form of a corporation and to convert an existing cooperative society into a formal corporation. For this, they engage in operations such as production, procurement, pooling, harvesting, grading, handling, marketing, selling, and import/export of all members’ primary producers.

Here are some of the most significant advantages of forming a Farmer Producer Company in India:

More trustworthiness -In comparison to other unregistered farmer or agriculturist groups, a producer business provides more legitimacy to farmers.

Separate legal entity with limited responsibility- The formation of a production company provides its members with a separate legal entity and restricted liability.

Owning of property- A properly registered farmer corporation has the authority to sell or possess real estate in its name. It also has the authority to take deposits or provide loans to its agriculturist members at very low-interest rates.

Management and registration are simple.

It is straightforward to register as a production business, and the firm can make changes to the Board of Management by completing a few basic paperwork with the relevant ROC.

Deposits are accepted -Deposits can be made in the form of fixed or recurring deposits by a registered firm. They can also release the loan to members and farmers at any time.

What are the advantages of joining the Farmer Producer Company?

Here are some of the producing company’s main benefits to its own members:

• The most essential benefit is that members of the Producer Company receive the money for the produce pooled and delivered once the directors of the relevant producer company have determined the amount. This money is then distributed to the business’s members in the form of cash or equity shares. • Producer Company members also get bonus shares in the same proportion as the equity shares they own in the producer company.
• Surplus (after allowing for the payment of the minimal return and reserves) may be returned to the producing company’s members as a patronage bonus. Patronage bonus refers to the distribution of surplus money to the production company’s members in proportion to their patronage.

In India, what are the tax advantages for a farmer-producer company?

Section 10(1) of the Income Tax Act of 1961 exempts agricultural income. The agricultural income exemption, on the other hand, differs according to on the activity carried out by the producers or farmers. The Income Tax Act does not give any particular tax benefits to farmer producer firms, but there are several tax exclusions and perks that they can take advantage of based on the agricultural activity that the company engages in. For example, currently, the agriculture income is 100% exempted. As a result, money earned from green tea leaves is tax-free, but if those tea leaves are used to make tea, 60 percent of the income will be exempt, while the remaining 40 percent would be taxed.

As a result, it is evident that tax advantages and exemptions are dependent on the company’s activity. During periods of restricted return distribution and patronage bonus, the Producer Company is obligated to pay dividend tax at the corresponding rates, while the dividends are tax-free in the hands of the company’s members. Members are exempt from paying taxes during the allotment of Bonus Shares. During the sale or redemption, however, regulations relating to capital gain tax will apply.

Summary

Due to a lack of infrastructure and fragmented landholdings, the majority of farmers in India struggle to achieve the best value for their primary crop. However, producer firms in India assist them in utilizing economies of scale to obtain inputs at the lowest cost, implement new technologies, have easy access to funding and loans, establish direct market links, and construct post-harvest processing facilities. The Farmer Producer Company is a group of farmers who have banded together to enhance their lives and living conditions. The formation of a farmer producer company creates a separate legal entity for the business, as well as certain tax advantages and perks. Aside from that, it offers a variety of perks to its members, such as bonuses, easy access to low-interest loans, and much more.

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