Section 80P Deduction for Co-operative Societies

Written By – PKC Desk, Edited By – Deepa, Reviewed By – Balaji Prasath

Co-operative society

Cooperative societies in India play a crucial role in various sectors of the economy, including agriculture, finance, housing, and consumer goods. These societies are formed by groups of individuals who come together voluntarily to address common economic, social, or cultural needs and aspirations.

In agriculture, cooperative societies often provide farmers with access to credit, agricultural inputs, and marketing facilities. They help in pooling resources and leveraging collective bargaining power to ensure better prices for agricultural produce.

What is section 80P?

Section 80P of the Income Tax Act provides for deductions concerning certain income of cooperative societies. Cooperative societies engaged in activities such as agriculture, fishing, cottage industries, or providing credit facilities to their members are eligible for this deduction. The deduction applies to the profits and gains derived from such activities.

Under this section, certain specified income of a co-operative society would be allowed as a deduction, provided such income is included in the gross total income of the society.

Eligible Deduction

INCOME ARISED FROM THE FOLLOWING ACTIVITIES	Quantum Of deduction
Carrying on the business of banking providing credit facilities to its members Cottage industry The marketing of the agricultural produce grown by its members The purchase of agricultural implements, seeds, livestock or other articles intended for agriculture or for the purpose of supplying them to its members The processing without the aid of power, of the agricultural produce of its members The collective disposal of the labour to its member. Fishing and other allied pursuits, such as catching, curing, processing, preserving, storing and marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to their members.	100% Deduction of profit & gain attributable from any one or more of the activities
From the primary co-operative society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to a federal co-operative society engaged in 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 6176 of the Companies Act, 1956 or a corporation established by or under a Central, State or Provincial Act (engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public)	100% of profit & gain attributable from such business
Interest or dividend from its investment with any other co-operative society or	100% deduction of such income
Income from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities	100% deduction of such income
Interest on securities and income from house property to certain co-operative societies the gross total income of the co-operative society does not exceed Rs.20,000 and it is not a housing society an urban consumer ‘s society a society carrying on transport business a society engaged in the performance of any manufacturing operations with the aid of power.	100% deduction of such income
A co-operative society which is engaged in activities other than to those mentioned above either independently of, or in addition to, all or any of the activities.	Rs.1,00,000 in the case of consumer co-operative societies Up to Rs.50,000 From other activities

**Note : However, the exemption in respect of income referred to in (6) or (7) will be available only in the case of those co-operative societies which, under their rules and by-laws, restrict the voting rights to

(i) members who contribute their labour force or who actually carry on the fishing or other allied activities,
(ii) the co-operative credit societies which provide financial assistance to the society and
(iii) the State Government.

Non applicability of Section 80P

Section 80P of the Income Tax Act, which provides deductions for certain income of cooperative societies, does not extend to cooperative banks. Cooperative banks, other than primary agricultural credit societies are excluded from availing tax benefits under this provision, unlike other types of cooperative societies. Therefore, cooperative banks do not qualify for deductions under Section 80P for activities such as agriculture, fishing, or providing credit facilities to members. This exclusion is a notable aspect of the tax treatment of cooperative banks under the Income Tax Act.

Frequently Asked Questions

It is mandatory to file Income tax returns for Cooperative society which avails credit facilities to its members and it is eligible for deduction under 80P.

It is mandatory to file an income tax return for every person, whose total income exceeds the basic exemption limit before considering any exemption. Hence, Cooperative society has to file income tax return to claim deduction. Further, the deduction under section 80P cannot be availed if return is not filed within the due date.

Do cooperative societies enjoy an exemption from income tax?

The Supreme Court’s ruling has brought considerable relief to cooperative credit societies across the country. It affirms that, under Section 80P (2) of the Income Tax Act, these societies will not be categorized as banks. As a result, they will retain their eligibility for income tax exemption.

Author

Saraswathi T

Senior Article Associate expertise in taxation, audit and consulting. I have successfully helped businesses navigate complex tax regulations and optimize their tax strategies.