New tax rate for Co-operative society – Section 115BAD | Budget 2020

Meaning of co-operative society under Section 2(19) of the Income Tax Act, 1961, is defined as “a cooperative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State for the registration of co-operative societies.”

The residential status is generally R OR unless the control and management of its affairs is situated wholly outside India. In case of a housing or a premises society it is generally not possible that control and management is situated wholly outside India.

Like any other entity a co-operative housing society is also liable to file file income tax return if it has, during the previous year, total income exceeding the maximum amount not chargeable to income-tax, without giving effect to deductions under chapter VIA.

Since accounts of all cooperative societies are subject to statutory audit provisions under respective governing laws, therefore under sub clause (a) (ii) of Explanation 2 to section 139(1), due date for filling return of income under the Income Tax Act, 1961 for them is October 31.

A co-operative society is a mutual association and hence a concept of mutuality comes into picture according to which:

Surplus resulting from contributions from members minus expenses of the society is not income but rather represents savings and the same is covered by concept of mutuality. Concept of mutuality is based on the fact that one cannot trade with oneself and cannot make profit out of oneself.

However the bank interest earned by society or rent for any advertisement on the building, all such would be liable to tax.

Slab rate of co-operative society is as follows:

Now, after reading the basic of co-operative society, let’s see the new section i.e. 115BAD inserted by Finance Act, 2020 which tax the income of co-operative society at 22%.

“(1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being a co-operative society resident in India, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, shall, at the option of such person, be computed at the rate of twenty-two per cent., if the conditions contained in sub-section (2) are satisfied”

However to pay tax at 22% the following conditions needs to be satisfied which are similar to section 115BAC:

1. No deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of section 80JJAA;

2. No set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and

3. No claiming of depreciation, if any, under section 32, clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.

Nothing contained in this section shall apply unless option is exercised by the person in such manner as may be prescribed on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2021 and such option once exercised shall apply to subsequent assessment years.

Once option is exercised it cannot be withdrawn. However if any of the condition mentioned above is not fulfilled the benefit shall stand withdrawn for that year as well as any further years.

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