Maximising Benefits: Understanding Section 80P Deductions For Co-operative Societies
Updated: 28-01-2025 at 6:38 AM
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The Income Tax Act, 1961 provides for several profit-related deductions in Chapter VI-A. The objective of these provisions is to encourage taxpayers to invest in certain sectors
In case of profits and gains from certain industries such as hotels, small-scale industries, housing projects, export business and infrastructure development, these deductions are provided under Sections 80H to 80RRB.
Read More: 20 Easy Ways To Save Income Taxes!
What Is A Co-Operative Society?
The Co-operative Societies Act 1912 defines a co-operative society as a voluntary association of people who come together to meet their common economic, cultural and social needs through a jointly owned and democratically managed enterprise.
The Co-operative Societies Act 1912 is the main law governing co-operatives in India. However, state laws may also apply to co-operatives in certain states.
What Is Section 80P Of The Income Tax Act?
Section 80P in the Income Tax Act was introduced to aid in supporting and encouraging the development of cooperative societies through the provision of particular tax benefits. This section seeks to improve their viability and effectiveness.
These institutions are essential across various areas of the economy, which include retail, agriculture and banking. Section 80P allows cooperative societies to participate in sustainable development by removing them from the tax burdens they encounter, making it easier for them to serve their members and contribute to economic development.
Read More: Union Budget 2024: Revised Income Tax Slabs Under New Regime by FM Sitharaman
Tax Benefits Under Section 80P
The deductions under Section 80P of the Income Tax Act are a series of tax benefits granted to cooperatives which serve to reduce the cooperative’s income. The tax benefits granted under this section include:
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Deduction Of Income From The Provision Of Credit facilities
Income of cooperatives which provide credit facilities to their members., can be deducted from income in this category. Income from interest earned on loans granted by such cooperatives to their members and income received from their members in the course of lending to them are examples of this deduction category.
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Deduction Of Income From Consumer Business
This relates to products used by the members of the consumer cooperative. The income can be deducted if a consumer cooperative sells goods and merchandise to its members for consumption purposes. The purpose of this deduction is to promote small businesses and handicraft enterprises.
Read More: How Soon Will My Tax Refund Arrive After I File My ITR?
Who Is Not Eligible For Deduction Under Section 80P?
Section 80P does not apply to the following:
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Any cooperative bank (including regional rural banks) that is not a primary agricultural credit union (as defined in the Banking Regulation Act).
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A primary agricultural and rural development cooperative bank within the scope. This includes a society whose area of operation is in a taluk. Further, the primary purpose of these societies is to extend long-term loans for agricultural and rural development activities.
Conclusion
The cooperative society is an important part of economic policy. By supporting it with an income tax reduction of less than 80%, we can create a better society and help the Indian economy to grow further.
Click here, to read more about this 80P income tax deduction in detail.
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