There are a number of income tax laws in India that encourage specific industries to flourish. Sections 80H to Section 80RRB under Chapter VIA offer deductions for businesses such as housing projects, export businesses, hotels, small-scale industries, etc. Section 80P of the Income Tax Act lays down provisions for income tax deductions for profits and gains earned by cooperative societies, which are engaged in specified agricultural activities.
The following sections will discuss who can claim this deduction and up to what amount. Read along to know everything about Section 80P.
A cooperative society is not defined under Section 80P. However, according to Section 2(19) of the Income Tax Act, 1961, a co-operative society could be an entity registered under the Co-operative Societies Act, 1912 or under any other law governing the registration of co-operative societies in any state.
With the exception of cooperative banks, cooperative societies can claim income tax deductions for certain agricultural activities. Cooperative societies registered under the Co-operative Societies Act, 1912 or other state laws and earning income from such activities can get full deductions from their gross income. Note that Section 80P deduction is available only to primary agricultural credit society or rural development and primary cooperative agricultural banks.
The deductions available under Section 80P as discussed as follows:
Cooperative societies can get 100% of their profits and gains as income tax deductions in the following cases:
Cooperative societies belonging to categories (f) and (g) must fully restrict voting rights to the following people to be eligible for deductions u/s 80P:
The following are some additional deductions allowed for cooperative societies that are not cottage industries:
This includes deductions for any other income than the ones covered from (a) to (k). Consumer cooperative societies refer to those that work for the benefit of consumers. However, it does not include cooperative societies that supply coal and diesel for its members for use in brick and tile production.
Note that cooperative societies that provide banking services are eligible for the additional deductions.
The Finance Act 2016 also introduced some exclusions under Section 80P of the Income Tax Act. It is not applicable to cooperative banks, including regional rural banks. Only the following financial institutions are included:
There are also certain exclusions that apply for deductions against income from securities or house property under Section 80P(2f). With the following exceptions, no other cooperative society can claim a 100% deduction under this subsection.
Section 80P of the Income Tax Act offers tax deductions to cooperative societies for certain economic activities. If you have a cooperative society, you can get up to 100% deduction on profits from certain businesses. For other activities, you can get a deduction worth Rs. 50,000 to Rs. 1,00,000.
Ans: Such societies exist to provide mutual assistance, self-help and increase the marketability of products. In India, cooperative societies are governed by the Cooperative Societies Act of individual states or the Multi-State Cooperative Societies Act, 2002.
Ans: The following are allowable exemptions under Chapter III of the IT Act:
a) Section 10A – Exemption of profits from new industrial undertakings in a free trade zone.
Section 10B – Exemption of profits from a 100% export business for 10 years.
Ans: Under Section 44AA, cooperative societies must maintain books of accounts and other records for tax computation. Moreover, they must have their accounts audited by a chartered accountant u/s 44AB. Their accounts are also subject to audits from the administrative department under respective state cooperative laws. However, cooperative societies not engaged in businesses do not need tax audits u/s 44AB.
Ans: The Finance Act, 2020 introduced Section 115BAD to provide the benefit of a lower tax rate to resident cooperative societies. This allows them to get taxed at a 22% rate plus a 10% surcharge and 4% cess. A cooperative society has to forego various income tax exemptions and deductions such as Section 10AA, Section 32AD, Section 33AB, Section 35(1iia), Section 35(2AA), etc.
Ans: The following are the normal tax rates for cooperative societies:
a) For income up to Rs. 10,000 — 10%
b) Income from Rs. 10,000 to Rs. 20,000 — Rs. 1,000 + 20% on excess of Rs. 10,000
c) For income more than Rs. 20,000 — Rs. 3,000 + 30% on income above Rs. 20,000
Besides these, a surcharge of 12% for total income below Rs. 1 crore and a 4% health and education cess are applicable.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
What is Form 26QB for TDS? How to Download and Submit it?While purchasing a property, buyers are liable to pay various taxes. The Finance Act, 2013 made TDS... Read More »
PF Withdrawal Rules 2023 – Rules, Documents Required and TypesEPF/PF Withdrawal Employees’ Provident Fund (abbreviated as EPF) is a popular retirement sav... Read More »
Stamp Duty and Property Registration Charges in Delhi 2023It is compulsory for property buyers in the Capital to pay stamp duty in Delhi during property regi... Read More »
Income Tax Return – Documents, Forms and How to File ITR Online AY 2023-24In India, it is mandatory for all taxpayers who earn more than the basic tax exemption limit to fil... Read More »
What is Section 80CCD – Deductions for National Pension Scheme and Atal Pension YojanaThe Income Tax Act provides a number of deductions and tax benefits to taxpayers, so they can strat... Read More »
Tax on Dividend Income: Sources, Tax Rate and TDS on dividend incomeWhat are Dividends? Companies may raise funds for running their operations by selling equity. Th... Read More »
Section 112A of Income Tax Act: Taxation on Long-Term Capital GainsWhat is Section 112A? Section 112A of the Income Tax Act was announced in Budget 2018 to replace... Read More »
Section 206AB of Income Tax Act: Eligibility And TDS RateSection 206AB was introduced in the Finance Bill 2021 as a new provision pertaining to higher deduc... Read More »
What is a Credit Note in GST – Example, Format and StepsA GST Credit Note is mandatory for any GST-registered supplier of goods or services. As a supplier,... Read More »
Exemptions and Deductions Under Section 10 of Income Tax ActWhat Is Section 10 of the Income Tax Act? Section 10 of the Income Tax Act, 1961 provides tax-sa... Read More »
Section 57 of the Income-tax Act – Income from Other SourcesIt is quite likely that many entities - individuals as well as businesses - have multiple sources o... Read More »