With the presentation of the Finance Bill 2023 through the Budget speech by the Union Minister of Finance and Corporate Affairs, Nirmala Sitharaman, the central government sought to gain the confidence of the middle class and the co-operative sector, along with implementation of the seven-starred Saptharishi policy for inclusive and technology-driven governance, at the time of amrit kaal, when the pandemic-hit economy regains strength.
Major amendments that can be expected in the taxation of withdrawals by and from co-operative societies are compiled here.
Clause 51 of the Bill seeks to amend section 115BAD of the Income tax Act relating to tax on income of certain resident co-operative societies.
The existing provisions of the section 115BAD of the Income Tax Act, provides a concessional taxation regime for co-operative societies, wherein they can opt to pay tax at the reduced rate of twenty-two per cent. if they do not avail of any specified incentives or deductions.
It is proposed to make consequential amendments since new section 115BAE relating to tax on income of new manufacturing co-operative societies is being inserted. This amendment will take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
Clause 52 of the Bill seeks to insert a new section 115BAE of the Income tax Act relating to tax on income of certain new manufacturing co-operative societies The Taxation Laws (Amendment) Act, 2019, inter-alia, inserted section 115BAB to Act which provides that new manufacturing domestic companies set up on or after 1st October, 2019, which commence manufacturing or production by 31st March, 2023 and do not avail of any specified incentive or deductions, may opt to pay tax at a concessional rate of fifteen per cent. The time for commencing manufacturing or production has been extended to 31st March, 2024 by the Finance Act, 2022.
The same provision has not been provided to new manufacturing co-operative societies. It is proposed to insert a new section 115BAE so as to provide that new manufacturing co-operative society set up on or after 1st April, 2023, which commence manufacturing or production by 31st March, 2025 and do not avail of any specified incentive or deduction, may opt to pay tax at a concessional rate of fifteen per cent.
This amendment is set to take effect from 1st April, 2024 and will, accordingly, apply in relation to the assessment year 2024-2025 and subsequent assessment years.
The Union Budget 2023-24, proposed by Finance Minister Nirmala Sitharaman, also proposed to raise the limit for co-operative societies to withdraw cash without TDS (Tax Deducted at Source). The government intends to modify Section 194N of the Income Tax Act by adding a new clause that states, when the recipient is a co-operative society, the provisions of the section will apply as if “one crore rupees” were substituted with “three crore rupees”.
Section 194N requires banking companies, co-operative societies, or post offices to deduct 2% income tax at the time of paying cash if the payment or aggregate payment in cash exceeds one crore rupees in a year. Income Tax Return non-filers are subject to a TDS of 2% on payments exceeding 20 lakh but not exceeding 1 crore and 5% on payments exceeding 1 crore in a year. This amendment is set to come into force from April 1st, 2023.
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