Not just individuals and businesses but even cooperative societies involved in specific profit-generating activities are eligible for tax deductions. Provisions for the same are mentioned under Section 80P of the IT Act. Eligible cooperative societies can deduct as much as 100% of their profits from their total gross income under this section. Let us try to know more about Section 80P-

What is the Meaning of a Cooperative Society?

As per Section 2(19) of the IT Act, a cooperative society is an entity that is registered under the Cooperative Societies Act of 1912. Even entities registered under any specific laws that govern cooperative societies in a particular state are eligible for Section 80P deduction.

What are the Activities Eligible for Deduction Under Section 80P?

Cooperative societies engaged in the below-mentioned activities can claim tax deduction under Section 80P-
  • Cottage industry
  • Banking and credit facilities
  • Society members involved in the marketing of agriculture produce
  • Processing agriculture produce grown by society members without using power
  • Purchase of agricultural products such as livestock, seeds, etc. which would be distributed among the society members
  • Collective labour disposal of society members, fishing, or allied activities
  • Supplying milk, fruits, oilseeds, or vegetables to other federal cooperative society, local authority, government, or government company
  • Earning dividends or interest on investments made in other cooperative society
  • Earning income from renting out warehouse or storage
  • Earning income from any house property or interest from security investment

What is the Eligible Deduction Under Section 80P?

100% of the income or profits generated from activities listed above are eligible for Section 80P income tax deductions.
Moreover, eligible cooperative societies involved in other activities can also claim a deduction of up to Rs. 1 lakh in case if it is a consumer cooperative society and up to Rs. 50,000 in case of any other type of cooperative society.

Are There Any Exclusions Under Section 80P?

The Finance Act of 2006 introduced an important exclusion with regards to Section 80P. Cooperative banks are no longer eligible to claim tax deductions under this section.
This is done to treat cooperative banks similar to commercial banks that are not eligible for deductions under Section 80P.

Claiming Tax Deductions Under Multiple IT Sections Along with 80P

It is also possible that a cooperative society eligible for deductions under Section 80P is also eligible for deductions under other sections of the IT Act. In such cases, the Section 80P deduction can be computed based on the total gross income left after making use of other deductions.

Claiming deductions under multiple IT sections is mostly a complicated and error-prone affair. Guidance of a tax expert should be considered in such cases.

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DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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