The Union Budget 2026–27 proposes a set of targeted tax incentives to strengthen the cooperative sector, particularly primary cooperative societies and national cooperative federations. While presenting the Budget, Nirmala Sitharaman announced the extension of the existing deduction available to primary cooperative societies to include the supply of cattle feed and cotton seed produced by their members. Earlier, this deduction was limited to societies supplying milk, oilseeds, fruits, or vegetables grown by members. The Budget further proposes that inter-cooperative society dividend income will be allowed as a deduction under the new tax regime, provided such income is further distributed to members. Additionally, to support national cooperative federations, a three-year exemption is proposed for dividend income arising from investments made in companies up to 31 January 2026, subject to onward distribution to member cooperatives. These measures aim to encourage member-based production, improve cash flows, and reinforce the cooperative ecosystem.
Ministry of Finance
UNION BUDGET 2026-27 PROPOSES SEVERAL INCENTIVES FOR COOPERATIVES
SUPPLY OF CATTLE FEED AND COTTON SEED PRODUCED BY A PRIMARY COOPERATIVE SOCIETY ALLOWED FOR DEDUCTION
INTER-COOPERATIVE SOCIETY DIVIDEND INCOME ALLOWED AS DEDUCTION UNDER THE NEW TAXATION REGIME
Posted On: 01 FEB 2026 12:49PM by PIB Delhi
Union Budget 2026-27 has proposed several incentives for primary cooperative societies. Presenting the Budget in Parliament today, Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman proposed to extend the deduction allowed to a primary cooperative society for supply of cattle feed and cotton seed produced by its members. Presently, deduction is allowed to a primary cooperative society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members.
The Finance Minister also proposed to allow inter-cooperative society dividend income as deduction under the new tax regime to the extent it is further distributed to its members.
As an additional measure to support National Cooperative Federations, Smt. Nirmala Sitharaman further proposed to allow exemption for a period of 3 years, to dividend income received by a notified national co operative federation, on their investments made in companies up to 31.1.2026. This exemption would be allowed only for dividends further distributed to its member co-operatives.
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