Tax Rate of 22% for Resident Co-operative societies for the FY 2020-21 & On wards

Now, Co-Operative Societies can pay tax @ 22% (effective tax rate is 25.17%) under section 115BAD. The concessional rate of 22% tax rate is available only if the following conditions are satisfied:

1. Option to avail of the concessional rate of tax under section 115BAD has to be exercised on or before the due date specified under Section 139(1) for furnishing of first return of income in the prescribed manner.
2. Option once exercised cannot be withdrawn subsequently;
3. There is no time limit to exercise option u/s 115BAD for the benefit of lower tax rate;
4. Co-Operative Societies shall also not be allowed to claim brought forward MAT Credit for an assessment year for which the option has been exercised and for any subsequent assessment years.
5. Total income of the company has been computed without claiming specified deduction, exemption or incentives as under:

Relevant Section	Description of Deduction / Exemption
Section 10AA	Deduction for units established in Special Economic Zones (SEZ)
32(1)(iia)	Additional Depreciation
Section 32AD	Deduction for investment in new plant and machinery in notified backward areas
Section 33AB	Deduction in respect of tea, coffee or rubber business
Section 33ABA	Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India
Section 35(1)(ii)	Deduction for donation made to approved scientific research association, university college or other institutes for doing scientific research which may or may not be related to business
Section 35(1)(iia)	Deduction for payment made to an Indian company for doing scientific research which may or may not be related to business
Section 35(1)(iii)	Deduction for donation made to university, college, or other institution for doing research in social science or statistical research
Section 35(2AA)	Deduction for donation made to National Laboratory or IITs, etc. for doing scientific research which may or may not be related to business
Section 35AD	Deduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc.
Section 35CCC	Deduction for expenditure on agriculture extension project
Any Provision of Chapter VI-A	Deduction in respect of certain incomes other than specified under Section 80JJAA

 

It may be noted that if a Co-Operative Societies has brought forward losses on account of additional depreciation or credit of MAT, society may exercise the option after setting off the brought forward losses so accumulated or after utilizing the said MAT credit against the regular tax payable. The option has to be exercised by making proper analysis on case to case basis.

Following section 115BAD shall be inserted by the Finance Act, 2020, w.e.f. 1-4-2021 :

Tax on income of certain resident co-operative societies.

115BAD. (1) Notwithstanding anything contained in this Act but subject to the provisions of this Chapter, the income-tax payable in respect of the total income of a person, being a co-operative society resident in India, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, shall, at the option of such person, be computed at the rate of twenty-two per cent, if the conditions contained in sub-section (2) are satisfied:

Provided that where the person fails to satisfy the conditions contained in sub-section (2) in computing its income in any previous year, the option shall become invalid in respect of the assessment year relevant to that previous year and subsequent assessment years and other provisions of the Act shall apply, as if the option had not been exercised for the assessment year relevant to that previous year and subsequent assessment years.

(2) For the purposes of sub-section (1), the total income of the co-operative society shall be computed,—

 (i)  without any deduction under the provisions of section 10AA or clause (iia) of sub-section (1) of section 32 or section 32AD or section 33AB or section 33ABA or sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35 or section 35AD or section 35CCC or under any of the provisions of Chapter VI-A other than the provisions of section 80JJAA;

(ii)  without set off of any loss carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in clause (i); and

(iii) by claiming the depreciation, if any, under section 32, other than clause (iia) of sub-section (1) of the said section, determined in such manner as may be prescribed.

(3) The loss and depreciation referred to in clause (ii) of sub-section (2) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent year:

Provided that where there is a depreciation allowance in respect of a block of asset which has not been given full effect to prior to the assessment year beginning on the 1st day of April, 2021, corresponding adjustment shall be made to the written down value of such block of assets as on the 1st day of April, 2020 in such manner as may be prescribed, if the option under sub-section (5) is exercised for a previous year relevant to the assessment year beginning on the 1st day of April, 2021.

(4) In case of a person, having a Unit in the International Financial Services Centre, as referred to in sub-section (1A) of section 80LA, which has exercised option under sub-section (5), the conditions contained in sub-section (2) shall be modified to the extent that the deduction under the said section shall be available to such Unit subject to fulfilment of the conditions contained in that section.

Explanation.—For the purposes of this sub-section, the term “Unit” shall have the meaning assigned to it in clause (zc) of section 2 of the Special Economic Zones Act, 2005 (28 of 2005).

(5) Nothing contained in this section shall apply unless option is exercised by the person in such manner as may be prescribed on or before the due date specified under sub-section (1) of section 139 for furnishing the return of income for any previous year relevant to the assessment year commencing on or after the 1st day of April, 2021 and such option once exercised shall apply to subsequent assessment years:

Provided that once the option has been exercised for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.