Income Tax 2025

Appearance

Deduction in respect of income of co-operative societies. ​

149(1) ​

If the gross total income of an assessee, being a co-operative society, includes any income referred to in sub-section (2), the sums specified in the said sub-section shall, in accordance with and subject to the provisions of this section, be allowed as deduction in computing the total income of such assessee.

149(2) ​

The sums referred to in sub-section (1) shall be the following:—

  • (a) in the case of a co-operative society engaged in—
    • (i) carrying on the business of banking or providing credit facilities to its members; or
    • (ii) a cottage industry; or
    • (iii) the marketing of agricultural produce grown by its members; or
    • (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members; or
    • (v) the processing, without the aid of power, of the agricultural produce of its members; or
    • (vi) the collective disposal of the labour of its members; or
    • (vii) 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, the whole of the amount of profits and gains of business attributable to any one or more of such activities;
  • (b) 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––
    • (i) a federal co-operative society, engaged in the business of supplying milk, oilseeds, fruits or vegetables; or
    • (ii) the Government or a local authority; or
    • (iii) a Government company, as defined in section 2(45) of the Companies Act, 2013, or a corporation established by or under a Central Act or State Act or Provincial Act, engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public, the whole of the amount of profits and gains of such business;
  • (c) in the case of a co-operative society engaged in activities not specified in clause (a) or (b), (either independently of, or in addition to, all or any of the activities so specified), that amount of profits and gains attributable to such activities as does not exceed––
    • (i) one lakh rupees, if the society is a consumers’ co-operative society; and
    • (ii) fifty thousand rupees, in any other case;
  • (d) 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, the whole of such income;
  • (e) in respect of any income by derived by the co-operative society from the letting of godowns or warehouses for storage, processing, or facilitating the marketing of commodities, the whole of such income;
  • (f) in the case of a co-operative society, not being––
    • (i) a housing society; or
    • (ii) an urban consumers’ society (being a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area, or cantonment); or
    • (iii) a society carrying on transport business; or
    • (iv) a society engaged in performing manufacturing operations with the aid of power, where the gross total income does not exceed twenty thousand rupees, the amount of income––
    • (i) by way of interest on securities; or
    • (ii) any income from house property chargeable under section 20.

149(3) ​

In the case of a co-operative society as referred to in sub-section

  • (2)(a)(vi) or (vii), provisions of sub-section (2) shall apply when the rules and bye-laws of the society restrict the voting rights to the following classes of members:—
  • (i) the individuals who contribute their labour or carry on fishing or allied activities; or
  • (ii) the co-operative credit societies which provide financial assistance to the society; or
  • (iii) the State Government.

149(4) ​

The deduction under sub-section (1) in relation to the sums specified in sub-section (2)(a)or (b) or (c) or sub-section (3), shall be allowed with reference to the income referred to in those sub-sections included in the gross total income after reducing the deduction under section 80-IA of the Income-tax Act, 1961, if the assessee is also entitled to such deduction.

149(5) ​

The provision of this section shall not apply to any co-operative bank which is not a primary agricultural co-operative society or a primary co-operative agricultural and rural development bank.

149(6) ​

In this section,––

  • (a) “consumers’ co-operative society” means a society for the benefit of the consumers;
  • (b) “co-operative bank” and “primary agricultural credit society” have the same meanings as respectively assigned to them in Part V of the Banking Regulation Act, 1949; and
  • (c) “primary co-operative agricultural and rural development bank” means a society having an area of operation confined to a taluk, the principal object of which is to provide long-term credit for agricultural and rural development activities.
Explanation

Section Summary: ​

Section 149 of the Income Tax Act provides deductions for co-operative societies on specific types of income. The purpose is to encourage and support co-operative societies engaged in activities like banking, cottage industries, agricultural marketing, and other community-beneficial operations. The section outlines the types of income eligible for deductions and the conditions under which these deductions apply.

Key Changes: ​

  1. Expanded Scope of Deductions: The section now explicitly includes income from activities like fishing, collective disposal of labour, and letting of godowns or warehouses for storage and marketing.
  2. New Categories for Deductions: Specific deductions are introduced for primary co-operative societies supplying milk, oilseeds, fruits, or vegetables to federal co-operative societies, government entities, or public corporations.
  3. Exclusion of Certain Co-operative Banks: Co-operative banks that are not primary agricultural co-operative societies or rural development banks are excluded from these deductions.

Practical Implications: ​

  1. For Co-operative Societies:
    • Societies engaged in banking, cottage industries, agricultural marketing, or fishing can claim 100% deduction on profits from these activities.
    • Primary societies supplying milk, oilseeds, fruits, or vegetables to government or federal co-operative societies can also claim 100% deduction on profits.
    • Other co-operative societies (e.g., consumer co-operative societies) can claim deductions up to ₹1 lakh or ₹50,000, depending on their type.
  2. For Compliance:
    • Societies must ensure their activities align with the specified categories to claim deductions.
    • Societies must maintain proper documentation to substantiate the income derived from eligible activities.

Critical Concepts: ​

  1. Gross Total Income: The total income of the co-operative society before applying deductions under this section.
  2. Profits and Gains of Business: Income derived from the specified activities listed in the section.
  3. Primary Agricultural Co-operative Society: A society focused on providing credit or other support for agricultural activities, as defined under the Banking Regulation Act, 1949.
  4. Interaction with Section 80-IA: Deductions under this section are allowed after reducing any deductions claimed under Section 80-IA (deductions for industrial undertakings).

Compliance Steps: ​

  1. Identify Eligible Activities: Determine if the society’s activities fall under the categories listed in Section 149(2).
  2. Maintain Records: Keep detailed records of income derived from eligible activities.
  3. Calculate Deductions: Compute the deductions based on the applicable limits (e.g., ₹1 lakh for consumer co-operative societies, ₹50,000 for others).
  4. File Returns: Include the deductions in the income tax return, ensuring compliance with the conditions specified in the section.

Examples: ​

  1. Example 1: A co-operative society engaged in marketing agricultural produce grown by its members earns ₹5 lakh in profits. Under Section 149(2)(a)(iii), the entire ₹5 lakh is deductible from its gross total income.
  2. Example 2: A primary co-operative society supplies milk to a federal co-operative society and earns ₹3 lakh in profits. Under Section 149(2)(b), the entire ₹3 lakh is deductible.
  3. Example 3: A consumer co-operative society earns ₹1.5 lakh from activities not specified in clauses (a) or (b). Under Section 149(2)(c)(i), it can claim a deduction of ₹1 lakh, and the remaining ₹50,000 will be taxable.

This section incentivizes co-operative societies to engage in activities that benefit their members and the community by providing significant tax relief.