is tds required to be recovered by a coop. credit society

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SRIDHAR (Querist)
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26 September 2013 1) Weather TDS has to be recovered by a COOP. CREDIT SOCIETY on the interest and dividend paid to it's members?
2) Weather TDS has to be recovered by a COOP. CREDIT SOCIETY on on interest and dividend paid to it's nominal members?
3) Is it required by the members of a coop CREDIT SOCIETY to declare the interest and dividend received from the society and pay income tax on these amounts?

FROM
W SRIDHAR , PRESIDENT
SPE coop CREDIT SOCIETY,SRIHARIKOTA

Nikhil Kaushik

Nikhil Kaushik (Expert)
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30 September 2013 Dear Sridhar Sahab,

With regards to deduction of TDS on interest paid to its members by a cooperative credit society no TDS is required to be deducted by virtue of exemption provided under Section 194A(3)(v) of the Income tax act, 1961.

However, it is necessary this exemption shall apply to only such members who have joined in application for the registration of the co-operative society and those who are admitted to membership after registration in accordance with the bye-laws and rules. A member eligible for exemption under section 194A(3)(v) must have subscribed to and fully paid for at least one share of the co-operative bank, must be entitled to participate and vote in the General Body Meetings and/ or Special General Body Meetings of the co-operative bank and must be entitled to receive share from the profits of the co-operative bank.

With respect to dividend, Section 194 only applies only to companies, a cooperative society is not liable to deduct TDS on dividend paid to its members.

With respect to your question on taxability in the hands of the recipient of interest and dividend, both are taxable in the hands of the receiver, most likely as income from other sources. Consequently, taxes are payable.