Resident Co-operative Societies taxed at Rate of 22% plus 10% Surcharge and 4% Cess from Financial Year 2020-21 as per Section 115BAD in Income Tax Act.
Currently, the co-operative societies are taxed at the slab rates and the highest slab rate is 30% which applies when income exceeds Rs. 20,000.
Taxation Law Amendment Act inserted new sections to provide domestic companies with an option to be taxed at the concessional tax rates. To bring parity between the co-operative societies and domestic companies, a new section 115BAD has been proposed to be inserted in Income-tax Act to provide an option to the co-operative societies to get taxed at the rate of 22% plus 10% surcharge and 4% cess.
The Resident Co-operative societies have an option to opt for taxation under newly proposed section 115BAD of the Act. The option once exercised under this section cannot be subsequently withdrawn for the same or any other previous year.
If the new regime of Section 115BAD is opted by a co-operative society, its income shall be computed ..
- without providing for specified exemption, deduction or incentive available under the Act.
- The societies opting for this section have been kept out of the purview of Alternate Minimum Tax (AMT).
- Further, the provision relating to computation, carry forward and set-off of AMT credit shall not apply to these assessees.
The option to pay tax at lower rates shall be available only if the total income of co-operative society is computed without claiming following exemptions or deductions:
- Deduction for units established in Special Economic Zones (SEZ) [Section 10AA];
- Additional depreciation in respect of new plant and machinery [Section 32(1)(iia)];
- Deduction for investment in new plant and machinery in notified backward areas [Section 32AD];
- Deduction in respect of tea, coffee or rubber business [Section 33AB];
- Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India [Section 33ABA];
- 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)(ii)];
- Deduction for payment made to an Indian company for doing scientific research which may or may not be related to business [Section 35(1)(iia)];
- Deduction for donation made to university, college, or other institution for doing research in social science or statistical research [Section 35(1)(iii)];
- Deduction for donation made to National Laboratory or IITs, etc. for doing scientific research which may or may not be related to business [Section 35(2AA)];
- Deduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc. [Section 35AD];
- Deduction for expenditure on agriculture extension project [Section 35CCC];
- Deduction in respect of certain incomes other than specified under Section 80JJAA [Part C of Chapter VI-A].
Where a co-operative society exercises option for availing benefit of lower tax rate under section 115BAD, it shall not be allowed to claim set-off of any brought forward losses or depreciation attributable to any restricted exemption or deduction in the Assessment Year for which the option has been exercised and for any subsequent Assessment Year.