DEFINITION: A cooperative society is judged by SEC 2(19) of the Income Tax Act’1961 or under any other law for the time being in force in any State for the registration of the cooperative societies.
In order to get various tax reliefs, a cooperative society must set up a process for tax compliance, tax management and tax planning.
There is no threshold limit for taxability of income in case of a co-operative society. However, the Tax Slab rates are as follows:
| Tax slab (in Rs.) | Tax rates |
| Upto 10000 | 10% |
| 10001-20000 | 20% |
| Above 20000 | 30% |
♦ Special tax rates applicable to a Co-operative society: -U/s 115BAD
| Taxable Income | Tax Rate |
| Any Income | 22% |
Surcharge @12%, if Total Taxable Income > Rs. 1 crore, & Health & Education Cess@4%.
(A). The resident co-operative societies have an option to opt for taxation under newly Section 115BAD of the Act w.e.f. Assessment Year 2021-22. The option once exercised under this section cannot be subsequently withdrawn for the same or any other previous year.
(B). If the new regime of Section 115BAD is opted by a co-operative society, its income shall be computed without providing for specified exemption, deduction or incentive available under the Act.
‘(C). The Total income of the co-operative society has been computed:
(i) Without any deduction under:
-
- Section 10AA
- Section 32(1)(iia)
- Section 32AD
- Section 32AB
- Section 33ABA
- Section 35(1)(ii)/(iia)/(iii), Section 35(2AA)
- Section 35AD
- Section 35CCC
- Under any provisions of Chapter VI-A other than:
- Section 80JJAA
- Section 80LA
(ii) Without set off of any losses carried forward or depreciation from any earlier assessment year if such loss or depreciation is attributable to any of the deduction referred to in clause (i) and
(iii) After considering the depreciation u/s 32 [other than depreciation u/s 32(1)(iia)] in the manner as may be prescribed.
Taxability of the Receipts by Co-operative Society:
| Sr. no. | Incomes from | Instances | Is it Taxable? | Reason |
| 1. | Member’s contribution | Maintenance charges, Municipal Taxes, Electricity/water Charges | × | Exempted, based upon concept of mutuality. |
| 2. | Interest Charged on Outstanding dues of members | Interest on O/s income receivable | × | Exempted, based upon concept of mutuality. |
| 3. | Interest Income Earned on Investments made in Other Co-operative Bank | Interest earned on deposits made with other Coop. Banks | × | 100% deductible, u/s 80P(d). |
| 4. | Interest Income Earned on Investments made in Other Investments | Interest earned on deposits made with other nationalized Banks | ✓ | Fully Taxable |
| 5. | Dividend Income recd from Indian Co. | Dividend earned on TATA Steels – Exempt u/s 10(34) till A.Y. 2020-21. | ✓ | Fully Taxable [from A.Y 2021-2022.] |
| 6. | Dividend Income recd from other Co-op banks | Dividend recd from other Co-op banks | × | 100% deductible, u/s 80P(d). |
| 7. | Rental income from advertisement Hoardings | Affixing Advertisement banner over roof top | ✓ | Fully Taxable either U/H of PGBP or IOS.
Note: expenses incurred can be claimed as deduction on proportionate basis. |
| 8. | Rental income from mobile/ cable towers | Mobile tower affixed in premises of CHS | ✓ | Fully Taxable. U/H of IFHP.
Note: Assessee can claim the benefit of std. deduction @30% u/s 24(a), & also over Interest on borrowed capital. |
| Sr. no. | Nature of Incomes | Is it Taxable, if the income is received from | |
| Member | Non Member | ||
| 9. | Rental from use of Open Space/ Terrace | ×, based upon concept of mutuality. | ✓,U/H of IFHP.
Note: Assessee can claim the benefit of std. deduction @30% u/s 24(a), & also over Interest on borrowed capital. |
| 10. | Non-Occupancy Charges | ✓, as concept of Mutuality is not fulfilled. | N.A. |
| 11. | Parking Charges | ×, based upon concept of mutuality. | ✓,U/H of IFHP.
Note: Assessee can claim the benefit of std. deduction @30% u/s 24(a), & also over Interest on borrowed capital. |
♣ SECTION 80P: Deductions in respect of Income of Co-op Soc.:
(A): Where 100% deductions is allowed:
1. Profits earned out of certain activities:
a) Banking business or providing facilities to its members
b) Cottage industry
c) Marketing of agriculture produce grown by its members.
d) Purchase of agriculture implements used for agricultural activities for the purpose of supplying them to its members.
e) Processing, without the help of power, of the agriculture produce of its members.
f) Collection & disposal of the labor of its members.
g) Fishing or the allied activities.
2. Profits earned by the Cooperative society engaged in activity of supplying milk, oilseeds, fruits or vegetables, raised or grown by its members to:
a) Other federal Cooperative soc.
b) Government or local authority
c) Government or local authority engaged in supplying milk or oilseeds, fruits or vegetables to the General public.
3. Interest or the dividend Income earned by the Cooperative society from its investments with any other Cooperative Society.
4. Income from letting of godown or warehouse for storage, processing or facilitating the marketing of the commodities
AND
(B): General deductions:-
| Condition | Amount (Rs.) |
| where the cooperative Soc is the Consumer Coop Soc | Rs. 100000 |
| In any other case. | Rs. 50000 |
♣ Income Tax Compliances:
A Cooperative Soc is required to file its ROI in ITR 5 by 30th September of the Assessment Year. If Cooperative Society files the “Loss Return” then:-
| Condition | Implication |
| If return is filed within the stipulated time, | Losses Under Head“Capital Gains”,“Business Losses” can, only then be, carried forward. |
| If return is not Filled at all | Losses U/H House property, &unabsorbed depreciation cannot be carried forward. |
♣ Tax Audit requirements:
1). Tax audit is compulsory if turnover of society (engaged in business) is more than Rs. 1 crore (w.e.f. A.Y. 2013-14). [ not applicable to societies which do not carry on any business.]
2). A cooperative society falling u/s 44AA is required to maintain books of accounts and other documents as per provisions of IT Act, 1961. Also, it is required to get its accounts audited by CA u/s. 44AB, irrespective of the fact that its accounts are already audited by its administrative department.
3). A Co-operative Society is subjected to audit as per Co-operative Societies Act under which it was registered. If such Society gets the accounts of such business or profession audited under such law and furnish that Audit report and a further report by an accountant it shall be sufficient compliance with the provisions of Section 44AB.
4). It is to be noted that the statutory requirement is the submission of report of audit conducted under the Co-operative Societies Act and a further report by an accountant in the form prescribed under the Section.
5). the report of audit of the accounts of a person required to be furnished under section 44AB shall: –
a). in the case of a person who carries on business or profession and who is required by or under any other law to get his accounts audited, be in Form No. 3CA;
b). in the case of a person who carries on business or profession, but not being a person referred to in clause (a), be in Form No. 3CB.
6). The particulars which are required to be furnished under section 44AB shall be in Form No.3CD.”
♣ TDS Compliances:
1. Chart Showing liability to Deduct Tax at source:
| Entity making Nature of Payment | Co-operative BANK
|
Co-operative society having turnover > Rs. 50 Crores | Co-operative society having turnover < Rs. 50 Crores |
| TDS on payment of interest to other co-operative societies.
|
Amount exceeding Rs 40,000* | Amount exceeding Rs 40,000* | Not required |
| TDS on payment of interest to members (Including Nominal Members) | Amount exceeding Rs 40,000* | Amount exceeding Rs 40,000* | Not required |
| TDS on payment of interest to non-members. | Amount exceeding Rs 40,000* | Amount exceeding Rs 5,000 | Amount exceeding Rs 5,000 |
*The limit of Rs 40,000 to be read as Rs 50,000 in case the payment is made to a senior citizen.
2. As per Finance Act 2020, TDS has to be deducted u/s 194A by a co-operative society having gross receipts>Rs 50 Cr in case of payment of interest to its members and also to other co-operative societies irrespective of the fact that whether it is engaged in the business of banking or not.
It is bounded to obey the TDS provisions excepting few:
(a). No tax shall be deducted from any interest payable on debentures issued by any cooperative society u/s 193.
(b). TDS provisions u/s 194A are not applicable for interest other than interest on securities, if such income is credited or paid by a cooperative society to a member thereof or to any other cooperative society
(c). Though a cooperative society is not covered u/s 115-O i.e., not required to pay tax on distributed profit like domestic companies, TDS provision for dividends u/s 194 is not applicable
(d). Compliances of other TDS provisions like time limit for deposit of TDS, electronic filing TDS returns, issuance of NSDL generated Form 16A etc are all applicable for cooperatives.
Author Bio
Whether Income of a co-oeprative society purely engaged in trading activity of agriculture produce from third party is also covered u/s 80P
a society carrying on banking activity, what is the nature of turnover to compute 1 crore limit. is it deposit amount or advance amount or interest income and other credit to p l account please clarify
Is the whole income of Co-op Labour and construction societies from various construction projects exempt u/s 80p
1). Tax audit is compulsory if turnover of society (engaged in business) is more than Rs. 1 crore (w.e.f. A.Y. 2013-14). [ not applicable to societies which do not carry on any business.]
Give me some examples of societies which do not carry on any business. Can we say Housing Society, Credit Coop Society?
Can say housing co op society which do not undertake any business.
a co-op society engaged in production and sale of medicine charges GST on its products. whether tds shall be done on purchase value above 2.5 lakhs
Your question is not clear. 2.5 lakhs means what. There is specific limit and table attached in the article kindly refer to the same.
Nice Article ! But (1) i think sec.10 AA exemption income is for the units located in sez only. (2) If you claim that all the income under principle of mutuality is “Exempt”– can you plz quote any subsection under sec.10 which says that the income under the principle of mutuality is exempt…I have studied it a lot but no expert can answer this question. I am of the opinion that the co op society’s income under mutuality should not be called as exempt but it is not the income in the eyes of IT at all. I would be happy if you reply this query.
Pls call me on 90337 61478.
Thanks
hello madam
pls say me every co operative housing society require compulsory audit ??? in other words if co operative housing society not doing any business require compulsory audit
No
Nice compilation of whole gamut of co operative society taxation supported with tabular presentation
Contact – 8238601111
Thank you
whether tax audit required in case of a primary milk producers cooperative society (whose income is exempt us 80P) but T/O is 50 lakhs and profit of 3 lakhs (which is less than 8 % of turnover).
Not required as per audit limit.
Mam,
Thanks for good article. Pl.clarify weather TDS is applicable for interest paid to individual members by a Primary Land Development Bank which is having Gross Transaction of more than 1000 CR.
Sir cannot comment upon bank provision. Sorry
Is tax audit applicable to Co-operative socities providing supply of milk through dairy whose turnover more than 1 crore?
yes.
Nice compilation of whole gamut of co operative society taxation supported with tabular presentation
Thank you for an useful article
Welcome sir
Credit Co Operative Society engaged in accepting deposits from members and giving loans to members . Whether provisions of Section 269SS, 269T of the Income Tax Act applicable ? It can accept deposits and loan repayment from members in cash ?
Yes, applicable. Can do transaction in cash below Rs. 20,000/-
Very Good Article
Thank you so much…