Income Tax on inv in nationelized bank by co-op. cred. soc.

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LAXMAN KAMBLE

LAXMAN KAMBLE (Querist)
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13 October 2009 whether income tax is applicable on investments of co-operative credit societies in nationalized banks

Juzer Sadikot

Juzer Sadikot (Expert)
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13 October 2009 Dear Laxman,

Dont get you correctly, "Investment in Co-operative credit societies in NATIONALISED BANK"

No tax on making Investment, if any dividend is declared by the Credit Co-soc, then it shall be subjected to Income Tax.

Thanks

LAXMAN KAMBLE

LAXMAN KAMBLE (Querist)
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27 January 2010 whether income tax is applicable on investments of co-operative credit societies in nationalized banks

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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31 July 2024 The income tax implications for investments made by co-operative credit societies in nationalized banks are subject to specific provisions under the Income Tax Act, 1961. Here’s a detailed overview:

### **1. **Interest Income from Investments**

**Income Tax Applicability:**
- **Interest Income:** The interest earned by co-operative credit societies from investments in nationalized banks is taxable under the head “Income from Other Sources” in the income tax return of the society.

**Tax Rate:**
- The interest income is taxed at the applicable corporate tax rates for co-operative societies, which are generally lower than for regular companies. The rates can vary based on the type of co-operative society and other factors.

### **2. **Exemptions for Co-operative Societies**

**Special Exemptions:**
- **Section 80P:** Co-operative societies, including credit societies, can claim deductions under Section 80P of the Income Tax Act. This section provides various benefits and exemptions to co-operative societies, particularly related to their income from certain activities. However, the exemption under Section 80P generally pertains to income from the activities of the society itself and not necessarily on interest income from investments.

**Eligibility for Section 80P:**
- The exemptions under Section 80P are available for specific types of income like:
- Income from the business of banking or providing credit facilities to members.
- Income from investments or deposits made with other co-operative banks or institutions.

**Limitations:**
- If the interest is earned from investments in nationalized banks, it may not be eligible for the exemptions provided under Section 80P. The interest income will be subject to regular taxation unless specific exemptions are applicable based on the nature of the investment and activities of the co-operative society.

### **3. **Filing and Compliance**

**Filing Requirements:**
- Co-operative credit societies need to include the interest income in their tax return and compute the tax based on applicable rates. They must also ensure that any exemptions claimed under Section 80P are in line with the conditions stipulated.

**Tax Audit:**
- Depending on the turnover and income levels, co-operative credit societies may be required to undergo a tax audit as per Section 44AB of the Income Tax Act.

### **Summary**

1. **Interest Income:** Taxable under “Income from Other Sources.”
2. **Section 80P:** Offers specific exemptions related to co-operative society activities, but interest from nationalized banks may not be exempt.
3. **Compliance:** Proper reporting of interest income in tax returns and claiming applicable deductions.

If you have a specific scenario or additional questions regarding deductions and exemptions, consulting a tax professional who specializes in co-operative societies can provide tailored advice.