JAIPUR NATIONAL UNIVERSITY

SCHOOL OF BUSINESS AND MANAGEMENT

CORPORATE TAX MANAGEMENT

COMPUTATION OF INCOME FROM CO-OPERATIVE SOCIET

SUBMITTED TO:. SUBMITTED BY:

MS. SHIKHA AGGARWAL. ADITI AWASTHI

ASSISTANT PROFESSOR. MBA ( DUAL)
SBM. SBM
JNU

Co-operative Sector- Meaning and importance of co-operation

“Literally, Co-operation means working together. To be more appropriate, we may define Co-operation
as acting together to accomplish the common goal through Co-operative principles”. Likewise, Co-
operative society may be defined as an organisation of individuals with small means, formed for running
in common of business, the profits being shared in accordance with the amount of labour or capital
contributed by each Co-operation facilitates mass voluntary participation in an organised way to enlist
the support of millions of small farmers, artisans, craftsmen, cottage and small- scale enterprises.The
Co-operative form of organisation thus is an effective medium for bringing about the socio-economic
transformation of the hitherto neglected sectors. Where the masses flock, Co-operatives facilitate
material advancement through united action which in turn fosters self-reliance. The Co-operative
movement is acclaimed in all plan documents as the means of transferring the rural society.

Taxation on Co-operative Society

A business can be formed under the organizational set up of a cooperative society just like it can be
formed as a Company. There is a general belief that cooperative societies are exempted from the
various compliances of direct or indirect taxation. In fact it is not so – rather to get the various tax
reliefs, particularly for income tax,a cooperative society must set up a process for tax compliance, tax
management and tax planning
Impact of Tax on Co-operative Sector
INCOME TAX GOODS AND SERVICES TAX
Income Tax on Co-Operative Societies Section 2(19) of the Income Tax Act, 1961, has defined a co-
operative society as; “A 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.”
2. Deduction in respect of Income of Co-operative
Societies [Section 80P]
Where the assessee is a co-operative society and its gross total income includes the
following incomes, a deduction shall be allowed in accordance with and subject to
the provisions of this section:

(A) Where 100% Deduction is Allowed

In the case of the following co-operative societies, full deduction is allowable in

respect of following incomes:

(I) Profits attributable to certain Specified Activities [Section 80P(2)(a)]:

100% of the profits, included in Gross Total Income, attributable to any one or
more of the following activities are deductible to a co-operative society engaged
in: carrying on the business of banking or providing credit facilities to its members;
or a cottage industry; or the marketing of the agricultural produce grown by its
members; or the purchase of agricultural implements, seeds, livestock or other
articles intended for agriculture for the purpose of supplying them to its members;
or the processing, without the aid of power, of the agricultural produce of its
members; or the collective disposal of the labour of its members; or fishing or
allied activities, that is to say, the catching, curing, processing, preserving, storing
or marketing of fish or the purchase of materials and equipment in connection
therewith for the purpose of supplying them to its members. [Section 80P(2)(a)]

(II) Profits of certain primary co-operative societies [Section 80P(2)(b)]:

100% of the profits, included in Gross Total Income are deductible in the case of a
co-operative society, being a primary society engaged in supplying milk, oilseeds,
fruits or vegetables raised or grown by its members to a federal co-operative
society, being a society engaged in the business of supplying milk, oilseeds, fruits,
or vegetables, as the case may be; or the Government or a local authority; or a
Government company as defined in section 617 of the Companies Act, 1956 or a
statutory corporation (being a company or corporation engaged in supplying milk,
oilseeds, fruits or vegetables, as the case may be, to the public).
(III) Income from investment with other co-operative societies [Section 80P(2)(d)]:

100% of the profits, included in Gross Total Income are deductible in respect of
any income by way of interest or dividends derived by the co-operative society
from its investments with any other co-operative society.

(IV) Income from letting of "Godowns or Warehouse" [Section 80P(2)(e)]:

100% of the profits, included in Gross Total Income are deductible in respect of
any income derived by the cooperative society from the letting of godowns or
warehouses for storage, processing or facilitating the marketing of commodities.

(B) Where Deduction is Allowed to a limited extent

In the following cases, the co-operative societies are entitled to deduction to a

limited extent:—

(1) Co-operative society engaged in other activities [Section 80P(2)(c)]:

In the case of a cooperative society engaged in activities, other than those specified
in I and II of (A) above, either independently of, or in addition to, all or any of the
activities so specified, the profits and gains attributable to such other activities upto
the maximum limits indicated below are deductible. where such co-operative
society is a consumers' co-operative society Rs. 1,00,000 in any other case Rs.
50,000.

(2) Entire income by way of interest on securities or income from house property if gross total
income of a co-operative society (other than specified co-operative society) does not exceed
`20,000 [Section 80P(2)(f)]:

100% of the income from interest on securities or income from house property
shall be allowed as deduction in case of a co-operative society not being

a housing society or

an urban consumer society, or

a society carrying on transport business, or

a society engaged in the performance of any manufacturing operation with the aid
of power, provided its gross total income does not exceed Rs. 20,000.

Urban Consumer Co-operative Society means a society for the benefit of the
consumers within the limits of municipal corporation, municipality, municipal
committee, notified area committee, town area or cantonment.

3. Rates of Income Tax - Co-operative Societies

Where the total income does not exceed Rs.
10% of the total income;
10,000.

Where the total income exeeds Rs. 10,000 Rs. 1,000 pIus 20%. of the amount by which the
but does not exceed Rs. 20,000. total income exceeds Rs. 10,000;

Rs. 3,000 pIus 30%. of the amount by which the

Where the total income exceeds Rs. 20,000.
total income exceeds Rs. 20,000

Surcharge: The amount of income-tax shall be increased by a surcharge at the rate

of 12% of such income-tax in case of a co-operative society having a total income
exceeding Rs. 1 crore.

Marginal relief: The total amount payable as income-tax and surcharge on total
income exceeding Rs. 1 crore shall not exceed the total amount payable as income-
tax on a total income of Rs. 1 crore by more than the amount of income that
exceeds ` 1 crore.

Health and Education Cess: 'Health and Education Cess (H&EC) on Income Tax' @
4% on income tax (inclusive of surcharge, wherever applicable) shall be levied