A co-operative society is a society that has been registered under the Co-Operative Societies Act, 1912 or any other law that 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 to the income earned by a cooperative society shall be as follows:
| 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 a 2% education cess and 1% secondary and higher education cess on the income tax payable by the cooperative society on income earned.
If the co-operative society’s taxable income is above INR 1 Crore, a 12% surcharge will apply.
Filing of ITR & Due Dates for Filing
There is no threshold limit for filing an ITR or Income Tax Return of a cooperative society, as any income up to INR 10,000 is taxable at the rate of 10%. So, we can say that if a cooperative society has any taxable income, then it has to file a return of income.
It has to pay advance tax also, like other assesses, 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).
In section 44AA, a cooperative society is required to maintain books of accounts and other documents that would help the AO (Assessing Officer) compute the total taxable income earned by the cooperative society as per the provisions of the Income Tax Act. 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. However, it should be noted that the tax audit shall be applicable to societies that do not carry on any business-like housing societies that carry on the services for such members of the housing society alone.
Co-operative society should file ITR5 during an assessment year, and it should be filed within 30 September of the Assessment Year. For this, the date allowed by the State Cooperative Laws for holding the AGM, i.e., 31 December, shall not be considered.
To carry forward the loss earned by the cooperative 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 the following:
- 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 earned by a cooperative society to which the Principle of Mutuality is applicable shall not be taxed. A cooperative society is a mutual association, and the members come together for a common objective. They make contributions to 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 the 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.
Tax Audit
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 facilities to the members | The whole Profit earned from Such a Business | –Â Â Â Â Â Â Â Â Â This deduction is not available to Co-operative Bank since AY 2007-08. –Â Â Â Â Â Â Â Â Â 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. –Â Â Â Â Â Â Â Â Â This deduction can be claimed by Primary Co-operative Agricultural and Rural Development, Chit Funds. |
| 2 | Cottage Industry | The whole Profit earned from Such a Business | For qualifying as a cottage industry and availing this deduction: –Â Â Â Â Â Â Â Â Â Business is to be carried on on a small scale, with limited capital, labour and also turnover earned. –Â Â Â Â Â Â Â Â Â Business is carried out by members of society and their families alone. –Â Â Â Â Â Â Â Â Â Business must involve the manufacturing, production, or processing of cottages and not merely the trading of the same. –Â Â Â Â Â Â Â Â Â It should not be required to be registered under the Factories Act. |
| 3 | Marketing of Agricultural Produce | The whole Profit earned from Such a Business. | – |
| 4 | Purchase of Agricultural Implements, seeds, livestock, and other articles intended for agriculture | The whole Profit earned from Such a Business | This activity is conducted to provide or supply the same to its members |
| 5 | Processing Agricultural Produce of Members (without the aid of power) | The whole Profit earned from Such a Business | – |
| 6 | Collective Disposal of labour of its members | The whole Profit earned from Such a Business | Here for the availing of deduction –Â Â Â Â Â Â Â Â Â the earning of society should be through the utilization of the actual labour of its members or –Â Â Â Â Â Â Â Â Â the rules and bye-laws of the society restrict the voting rights to the following class of members, namely, Individuals who contribute their labour –Â Â Â Â Â Â Â Â Â State Government – Co-operative credit societies, which would provide financial assistance to the society. |
| 7 | Fishing and other activities which are associated with the same | The whole Profit earned from Such a Business | –Â Â Â Â Â Â Â Â Â 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. –Â Â Â Â Â Â Â Â Â Deduction shall be made available if the rules of the society restrict the voting rights to the class of members: a. Individuals who carry on fishing or 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 | The whole Profit earned from Such a Business | –Â Â Â Â Â Â Â Â Â Milk, oil seeds, fruits or vegetables that are grown or raised by its members themselves. – Milk, oilseeds, vegetables, or fruits are supplied to a federal co-operative society that is engaged in a similar business or to the government or local authority or a government company or a statutory corporation that is engaged in a similar business itself. |
| 9 | Engaged in any other activity | –Â Â Â Â Â Â Â Â Â Consumer Co-operative Society = INR 1 Lakhs –Â Â Â Â Â Â Â Â Â Others = INR 50,000 |
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| 10 | Interest income or Dividend income | The whole income | This shall be earned by investing in other co-operative societies. |
| 11 | Letting of godowns or warehouses | Whole Profit or Income earned from Such Business | It should be allowed for the activities of –Â Â Â Â Â Â Â Â Â storage, –Â Â Â Â Â Â Â Â Â processing or –Â Â Â Â Â Â Â Â Â facilitating the marketing of commodities |
| Â12 | Interest income earned on securities and other 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. |
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.
