27 December 2022
Is there any requirement to deduct TDS on F.D's collected from members of credit cooperative society ( not a bank). This society collect money from members in the form of F.D's and given loans to other members. Please explain clearly tds on credit cooperative society ( is there any requirement to pay income tax on internet received by the member )
11 July 2024
In the context of credit cooperative societies (CCS), particularly those that collect fixed deposits (FDs) from their members and subsequently provide loans to other members, the tax implications generally revolve around TDS (Tax Deducted at Source) and taxation on interest income received by members. Here’s a detailed explanation:
### 1. TDS on FDs:
Credit cooperative societies are not required to deduct TDS on the interest paid or credited to their members on FDs. This exemption is based on specific provisions under the Income Tax Act, which primarily apply to banking companies and cooperative banks.
According to Section 194A of the Income Tax Act, TDS on interest income is generally applicable when paid by banking companies or cooperative banks. However, credit cooperative societies that are not classified as banking companies or cooperative banks typically do not fall under this requirement. Therefore, unless there are specific regulatory changes or amendments, credit cooperative societies are not mandated to deduct TDS on interest payments to their members on FDs.
### 2. Taxation on Interest Income for Members:
- **Taxability**: Interest income earned by members from FDs with a credit cooperative society is taxable under the head "Income from Other Sources" as per the Income Tax Act.
- **Income Tax Deduction at Source (TDS)**: While the credit cooperative society does not deduct TDS on the interest paid to members, members are responsible for declaring this interest income in their income tax returns and paying applicable taxes on it.
- **Interest Income Reporting**: Members should receive a Form 16A or similar certificate from the credit cooperative society showing the interest income earned during the financial year. This certificate is used by members to accurately report their income in their tax returns.
### 3. Exemption for Cooperative Societies:
- Cooperative societies, including credit cooperative societies, enjoy certain exemptions and concessions under the Income Tax Act. These exemptions are primarily related to taxation on their income and not on the income distributed to their members.
- Members, however, are taxed individually on their share of interest income received from FDs with the credit cooperative society.
### Conclusion:
In summary, credit cooperative societies typically do not deduct TDS on interest payments to their members on FDs. Members are responsible for declaring and paying income tax on the interest income received from these FDs in their individual income tax returns. It’s advisable for members to maintain records of their FDs, interest certificates, and consult with a tax advisor if they have specific queries regarding the tax treatment of their interest income.
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