Set off of business loss against interest income

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Krishna (Querist)
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03 April 2024 Sir/madam
suppose if a credit co operative society incurred a loss from business of Rs. 1 lac & have interest income on deposits of Rs. 2 lacs i.e. 1 lac from investment with credit society & 1 lac from interest on deposits with nationalised bank then 1 lac business loss can be set off against the FD interest earned from deposits with nationalised bank & remaining 1 lac interest can be claimed as deduction us 80P(2)(d) ??
please reply thanks in advance

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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11 July 2024 Under Section 80P of the Income Tax Act, 1961, cooperative societies are eligible for certain deductions based on their income from specified sources. Here’s how the scenario you described would typically be treated:

### Treatment of Income and Losses for Cooperative Societies:

1. **Business Loss Set-off**:
- The cooperative society has incurred a business loss of Rs. 1 lakh from its business activities.
- According to income tax rules, business losses can be set off against any income earned by the cooperative society, including interest income.

2. **Interest Income from Deposits**:
- The cooperative society has earned interest income from two sources:
- Rs. 1 lakh from investments with other cooperative societies.
- Rs. 1 lakh from deposits with a nationalized bank.

3. **Set-off of Business Loss**:
- The Rs. 1 lakh business loss can be set off against the total interest income of Rs. 2 lakhs earned by the cooperative society.
- Therefore, the entire business loss of Rs. 1 lakh can be set off against the interest income earned from both cooperative societies and nationalized bank deposits.

4. **Deduction under Section 80P(2)(d)**:
- Section 80P(2)(d) allows cooperative societies a deduction on income from investments with other cooperative societies. This deduction is specifically for cooperative societies earning income from investments in other cooperative societies.
- In your case, the Rs. 1 lakh interest income earned from investments with other cooperative societies can be claimed as a deduction under Section 80P(2)(d).

### Summary:

- **Set-off**: The Rs. 1 lakh business loss can be fully set off against the Rs. 2 lakhs interest income earned from both cooperative societies and nationalized bank deposits.
- **Deduction**: The Rs. 1 lakh interest income earned from investments with other cooperative societies can be claimed as a deduction under Section 80P(2)(d).

This approach ensures that the cooperative society optimizes its tax benefits by utilizing the business loss against its total income and claiming the appropriate deduction under Section 80P for cooperative society income. It's advisable to consult with a tax advisor or Chartered Accountant for precise application and compliance with income tax laws based on your specific circumstances.