Dr R K Sharma & Dr Puneet Sudan
Union Budget presented by Nirmala Sitharaman, Finance Minister, Government of India on February 1, 2023 listed seven priorities of the Union Budget which includes amongst others inclusive development incorporating the cooperative movement as one of the areas to be focused. The relevant new amendments/sections of Income Tax Act related to Cooperatives have been covered in this article for understanding of the Members/stakeholders of Cooperative Societies and avail its benefits for the various financial transactions to be incurred by members or cooperative societies during the financial year. Cash withdrawal limit increased for Cooperative Societies from Rs 1 crore to 3 crore. Under Section 194N, the threshold limit for annual cash withdrawals have been increased from Rs 1 crore to Rs 3 crores for cooperative societies. Now cooperative societies can withdrawals cash from the bank account during a financial year up to Rs 3 crore without TDS. It will apply to the withdrawal of all the sums of money or an aggregate of sums from a particular bank in a financial year. Any private/public bank/Cooperative Bank/Post Office (Payer) shall deduct tax/TDS @ 2 per cent while making payment to any cooperative societies (Recipient) in cash from the bank account on the amount over of Rs.3 Crore. The limit of Rs.3 Crore in a financial year is with respect to per bank or post office account and not per the taxpayer’s bank account. This relief is only available to Cooperative Societies, who have filed their Income Tax Return. Cash transactions/loan limits Increased only for PACS & PCARDB & its Members. Under Sections 269SS/269T, Cash transactions (deposit/loan) limit of Rs.20000/- has been proposed to raise to Rs 2 Lakh for Primary Agricultural Credit Societies (PCAS) and Primary Co-operative Agricultural and Rural Development Bank (PCARDB) and its members. Now penalty at 100 per cent will be applicable only exceeds cash transactions (deposit/loan) of Rs 2 lakh instead of Rs 20,000. Relief to Cooperative Sugar Societies, under Section 155 (19), an amendment was made in Income Tax Act, 1961 in 2015 and under amended section 36(1) (xvii) deduction in respect of excess amount of expenditure incurred by a cooperative society for purchase of sugarcane over and above the Statutory Minimum Price (SMP) fixed by Central Government was allowed w.e.f., AY 2016-17 i.e. from Financial Year 2015-16. However, deductions of such expenditure were not allowed for years prior to FY 2015-16 and cooperative sugar societies were constantly asking for the relief for earlier years also. Now new sub-section (19) is proposed to be inserted in section 155 of Income Tax Act to provide that where any deduction in respect of sugarcane purchases, claimed by a cooperative society and disallowed either, wholly or partially, by income tax department for previous year commencing on or before 1st April 2014 (i.e. Financial Year 2014-15 and before), will be allowed on an application to be made by the cooperative society to the Assessing Officer with request to recomputed the total income for such year after allowing deduction to the extent at a price which is equal to or less than price fixed or approved by Government for that previous year. This amendment will be effective from 1st April 2023. Within 4 years from 1st April 2023 cooperative society should submit an application to Assessing Officer with a request to recomputed total income of that particular year. Separate application should be submitted for each such year in which there is disallowance of such expenditure. Details of disallowance of such expenses, computation of income etc. together with copies of original assessment order, sugarcane price approval from government; tax paid Challans etc. should be submitted with the application. Interest on income tax refund should also be requested. Rectification order under section 154 will be passed by the Assessing Officer within one year from the end of the year in which the application is submitted. The approximate amount of refund that will be issued to cooperative sugar factories is Rs.10000 crore plus interest of approximately of the same amount. Relief to New Manufacturing Cooperative Societies under section 115 BAE. New section 115BAE is proposed to be inserted in Income Tax Act, 1961 to provide concessional income tax rate of 15 per cent for Indian cooperative societies from FY 2023-24 (AY 2024-25) on fulfillment the prescribed conditions stated under section 115BAE. The cooperative manufacturing society shall require exercising the option in the prescribed manner on or before the due date specified for furnishing the first income tax return for selection of the concessional income tax rate. Once exercised the option shall apply to subsequent assessment years and shall not be allowed to be withdrawn for the same or any other previous year. The total income of the cooperative society shall be computed without deductions specified in this section and without set off of any loss or depreciation to any of those deductions, carried forwarded from earlier assessment years. TDS mismatched amount and relief to Cooperatives including others under Section 155 (20). In many instances, a cooperatives/member (Assessee) discloses an income in his return for a particular financial year (previous year) but TDS on such income is deducted by the deductor in subsequent year. In such instance, the assessee can neither claim the amount of TDS in the year in which the income is disclosed as the TDS is not available for claim nor in year of deduction because the income is already disclosed during earlier year and without income disclosure TDS is not allowed. In order to remove this difficulty, it is proposed to insert a new sub-section (20) in section 155 of Income Tax Act, 1961. This new sub-section shall apply where any income has been included in the return of income furnished by an assesse under section 139 of the Act for any assessment year and TDS has been deducted on such income and paid to the credit of the Central Government in a subsequent financial year. In such a case the assessee can make application in the prescribed form to the Assessing Officer within two years from the end of the financial year in which such TDS was deducted. The Assessing Officer shall amend the order relevant assessment year under section 154 of the Act. This amendment will take effect from 1st October 2023. Tax slab reduced from 18.5 per cent to 15 per cent for Cooperative Societies. Under Section 115JC. As per section 115JC of Income tax act the rate of Alternative Minimum Tax (AMT) for cooperative societies have been reduced from 18.5 per cent to 15 per cent except a cooperative society whose income is chargeable to tax under section 115BAD. This will reduce the tax burden on cooperatives by 3.5 per cent of book profits. Importance of filing of ITR’s by Members/Cooperatives/PACS. Under Section 80P Benefits available to PACS:
i) All PACS are mandatorily required to file Income Tax Returns on or before 31st July and in case of audited PACS 30th September of every next year for the previous Financial Year.
ii) It is immaterial having profits or losses incurred by PACS.
iii) Such PACS are eligible to claim 100 per cent of deduction of their profits under section 80P of Income Tax Act.
iv) If such PACS incurring losses, same can carried forward for next 8 subsequent assessment years and such loss can be set off again future profits within 8 years.
Reduction in MAT (Minimum alternative tax) for cooperatives: As per section 115JC of Income tax act the rate of Alternative Minimum tax for cooperatives have been reduced from 18.5 per cent to 15 per cent. That will reduce the tax burden on cooperatives by 3.5 per cent of book profits. Rate of surcharge have been reduced from 12 per cent to 7 per cent on the income from 1 crore to 10 crore.
(The authors are Director and Faculty, RICM-32, Chandigarh).