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Posted on November 22, 2021
Taxation of Co-Operative Society
Co-operative society is the society which has been registered under the Co-Operative Societies act, 1912 or any other law which is in force in any state for the registration of co-operative societies during the time of such registration.
Rates of Tax
The rates on income tax rate which shall be applicable on the income earned by a co-operative society shall be as below:
|TAXABLE INCOME||TAX RATE|
|Up to INR 10,000||10%|
|Between INR 10,000 and INR 20,000||20%|
|Above INR 20,000||30%|
This shall be coupled with 2% education cess and 1% secondary and higher education cess on the income tax payable by the co-operative society on income earned.
In case the taxable income of the co-operative society goes above INR 1 Crore, a surcharge of 12% shall be applicable on such income.
Filing of ITR & Due Dates for Filing
For filing of ITR or Income Tax Return of a co-operative society, there is no threshold limit as any income which is up to INR 10,000 shall be taxable at the rate of 10%. So, we can say that if a co-operative society is having any amount of taxable income, then it has to file return of income.
It has to pay advance tax also like other assesse’s in four instalments which would be as follows:
- within 15th June – 15%,
- within 15th September – 45%,
- within 15th December – 75%, and
- within 15th March – the payment should be the whole amount of tax to be paid in advance less by the amount paid in earlier instalment(s).
Pertaining to section 44AA, a cooperative society is required to maintain books of accounts and other documents which would help the AO (Assessing Officer), compute the total taxable income earned by the Co-operative Society as per the provisions of Income Tax Act. And as per section 44AB, the books of accounts of the co-operative society shall be audited by the Chartered Accountants or Auditors. This shall be in addition to the audit by the administrative department (Directorate of Cooperative Audit) as provided in the State Cooperative Laws.But it should be noted that the tax audit shall be applicable to societies which are not carrying on any business-like housing societies which are carrying on the services for such members of the housing society alone.
Co-operative society should file ITR – 5 during an assessment year and it should be filed within 30thSeptember of the Assessment Year, and for this the date which is allowed by the State Cooperative Laws for holding AGM i.e., 31st of December shall not be considered.
For carrying forward the loss which is earned by the co-operative society, like a company, it should file a loss return within the time prescribed by the Income Tax Act. This is mandatory for carrying forward of the:
- Business loss
- Capital Loss
And for claiming the loss earned under the head Income from House Property and unabsorbed depreciation it is mandatory that the return is filed.
Principle of Mutuality
Income which is earned by a co-operative society to which the Principle of Mutuality is applicable shall not be taxed. A co-operative society is a mutual association and the members in this come together for a common objective. And they make contributions for achieving the objective and also participate in the surplus which is arising out of the same. Here it is not necessary that all the members included in the society are making contribution to the fund but the benefit can be availed by everyone irrespective of the fact that they have contributed to the fund or not.So, we can say that, in case of contributions which are made by members of a co-operative society, a concept of mutuality shall be applicable and this therefore would not be considered as an income at all.
In case of a co-operative society which is engaged in a business activity, tax audit shall be applicable if the turnover earned during a relevant financial year is more than INR 1 Crore w.e.f. FY 2012-13 or AY 2013-14 onwards. The threshold limit was INR 60 Lakhs for the prior years.
Deductions Available to Co-Operative Society
As per section 80P, following are certain deductions which are made available to the Co-operative Society as per Income Tax Act.
|SL. NO.||NATURE OF INCOME or BUSINESS ACTIVITY||DEDUCTIBLE AMOUNT||APPLICABILITY & CONDITIONS|
|1||Providing credit facility to the members||Whole Profit earned from Such Business||– This deduction is not available to Co-operative bank since AY 2007-08.
– Providing credit facility here means providing loans and other credit facilities. But selling goods on hire purchase or credit purchase scheme would not be included in the same.
– This deduction can be claimed by Primary Co-operative Agricultural and Rural Development , Chit Funds.
|2||Cottage Industry||Whole Profit earned from Such Business||For qualifying as cottage industry and availing this deduction:
– Business is to be carried on in a small scale, with limited capital, labour and also turnover earned.
– Business is carried on by members of society and their families alone.
– Business must involve the activity of manufacturing, production or processing of cottage and not merely the trading of the same.
– It should not be required to be registered under Factories Act.
|3||Marketing of Agricultural Produce||Whole Profit earned from Such Business||–|
|4||Purchase of Agricultural Implements, seeds, livestock, other articles intended for agriculture||Whole Profit earned from Such Business||This activity is conducted for providing or supplying the same to its members|
|5||Processing Agricultural Produce of Members (without aid of power)||Whole Profit earned from Such Business||–|
|6||Collective Disposal of labour of its members||Whole Profit earned from Such Business||Here for the availing of deduction
– the earning of society should be through utilization of the actual labour of its members, or
– the rules and bye laws of the society restrict the voting rights to following class of members namely, Individuals who contribute their labour
– State Government
– Co-operative credit societies which would provide the financial assistance to the society.
|7||Fishing and other Activities which are associated with the same||Whole Profit earned from Such Business||– This includes catching, curing, processing, preserving, storing or marketing of fish or purchase of materials and equipment in connection therewith, for supplying the same to its members only.
– Deduction shall be made available if the rules of the society is restricting the voting rights to the class of members:
a. Individuals who carry on fishing or such other associated activities
b. Co-operative credit societies which provide financial assistance to the society
c. State Government
|8||Primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members||Whole Profit earned from Such Business||– Milk, oil seeds, fruits or vegetables that are grown or raised by its members itself.
– Milk, oilseeds, vegetables or fruits whichare supplied to a federal co-operative society that isengaged in similar business or to the Government or local authority ora Government company or a statutory corporation which is engaged in similar business itself.
|9||Engaged in any other activity||– Consumer Co-operative Society = INR 1 Lakhs
– Others = INR 50,000
|10||Interest income or Dividend income||The whole income||This shall be earned by making investment in other co-operative society.|
|11||Letting of godowns or warehouses||Whole Profit or Income earned from Such Business||It should be let for the activities of
– processing or
– facilitating the marketing of commodities
|12||Interest income earned on securities andother property income||The whole income||– This benefit would not be available to housing society, urban consumers society, society carrying on transport business, society which is again engaged in manufacturing operations with aid of power.
– The GTI (Gross Total Income) of this society should not exceed INR 20,000.
And it shall also be noted that, if a Co-operative Society is supposed to deduct TDS (Tax deducted at Source) in case of any payment made by them, then they are required to take TAN such that the deduction can be made and remitted to the government.