DBT Bureau
Pune, 6 August 2024
In order to realize the vision of ‘Sahakar se Samriddhi,’ the Government has taken the following steps to provide relief to cooperative societies, which include the reduction of tax on various activities and an increase in the threshold for TDS on cash withdrawals:
Reduction in Surcharge on Cooperative Societies
The surcharge on cooperative societies has been reduced from 12% to 7% on income exceeding Rs 1 crore and up to Rs 10 crore. This reduction aims to enhance the income of cooperative societies and its members, who are mostly from rural and farming communities.
Reduced Alternate Minimum Tax Rate for Cooperatives
Cooperative societies were previously required to pay Alternate Minimum Tax (AMT) at the rate of 18.5%, while companies paid it at 15%. To level the playing field, the AMT rate for cooperative societies has been reduced to 15%.
Clarification Regarding Section 269ST
Section 269ST restricts cash receipts exceeding Rs 2 lakh from any person in a day or from multiple transactions related to a single event or occasion. This provision led to penalties for Milk Cooperative Societies that received cash in excess of Rs 2 lakh across multiple days. The CBDT, via Circular No. 25/2022 dated 30.12.2022, clarified that for cooperative societies, a dealership/distributorship contract may not constitute a single event or occasion under clause (c) of Section 269ST. Payments related to such contracts received on different days can be treated separately, allowing Milk Cooperative Societies to avoid penalties when making payments to members, particularly on bank holidays.
Concessional Tax Rate for New Manufacturing Cooperative Societies
New cooperatives that commence manufacturing activities by 31.03.2024 will benefit from a lower tax rate of 15%, similar to the rate available to new manufacturing companies.
Relief for Cash Loans/Transactions by Primary Cooperatives
Section 269SS of the Income Tax Act, 1961, previously prohibited cash deposits or loans exceeding Rs 20,000. The limit has been increased to Rs 2 lakh for Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Banks (PCARDBs), thus reducing the penalty risk for cash transactions.
Relief for Repayment of Loans in Cash by Primary Cooperatives
Section 269T of the Income Tax Act, 1961, which disallowed cash repayments of loans or deposits over Rs 20,000, has been amended. PACS and PCARDBs can now make or receive cash repayments up to Rs 2 lakh without incurring penalties.
Increased Threshold Limit for Cash Withdrawals Without TDS
The cash withdrawal limit for cooperative societies without deduction of tax at source has been increased from Rs 1 crore to Rs 3 crore per year. This change will enhance the liquidity of cooperative societies.
Relief to Sugar Cooperatives for Sugarcane Purchase Expenditures
Section 36(1)(xvii) of the Income Tax Act, 1961, provides deductions for expenditures incurred by cooperative societies engaged in sugar manufacturing. The Central Board of Direct Taxes (CBDT) clarified through Circular No. 18/2021 dated 25.10.2021 that additional payments for sugarcane price by Cooperative Sugar Mills (CSMs) are not taxable, thus mitigating tax liabilities for CSMs.
Relief to Sugar Cooperatives from Past Income Tax Demands
Sugar cooperatives can now claim deductions for payments made to sugarcane farmers before the assessment year 2016-17. Section 155 of the Income Tax Act has been amended by the Finance Act, 2023, effective from 1st April 2023. CBDT Circular No. 14 of 2023 dated 27.07.2023 has standardized the process for filing applications and resolving pending tax issues, benefiting cooperative sugar mills and sugarcane growers with a cumulative relief of approximately Rs 43,407 crores.
Condonation of Delay for Claims Under Section 80P
CBDT Circular No. 13/2021 dated 26 July 2023 authorizes Chief Commissioners of Income-tax (CCsIT) and Directors General of Income-tax (DGsIT) to address applications for condonation of delay from cooperative societies that were unable to claim deductions under Section 80P due to delays in filing returns or auditing accounts for assessment years 2018-19 to 2022-23.
