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February 1, 2022

Know Changes in Income Tax Rate in Budget 2022 and Taxation in case of Co operative Society

by Mahesh Mara in Budget, Income Tax

Know Changes in Income Tax Rate in Budget 2022 and Taxation in case of Co operative Society

A cooperative is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned enterprise”. Cooperatives are democratically owned by their members, with each member having one vote in electing the board of directors. In this article we will discuss all the taxation aspect related to Cooperative society.

What are the rate of tax in case of Co operative Society?

In the case of co-operative societies, the rates of income-tax have been specified as below:

Amount of IncomeRate of tax
10, 00010%
More than 30,00030%

What is the rate of Surcharge applicable to Co-operative Society?

Provided that in case where the total income includes any income by way of dividend or income chargeable under clause (b) of sub-section (1) of section 115AD of the Act, the rate of surcharge on the income-tax calculated on that part of income shall not exceed fifteen percent;

(b) In the case of every co-operative society (except resident co-operative society opting under section 115BAD) or firm or local authority, at the rate of 12% of such income-tax, where the total income exceeds 1 crore rupees;

(c) In case of resident co-operative society opting under section 115BAD, at the rate of 10% of such income tax.

What is section 115JC: Alternate Minimum Tax?

Finance Act, 2011 introduced a new “Chapter XIIBA” to provide payment of Alternate Minimum Tax (AMT) by LLPs and after that it has been amended by Finance Act, 2012 in which it is covered all other non-corporate assesses. AMT is not applicable to Individual, HUF, Association of Persons/ Body of Individuals and Artificial judicial person if adjusted total income of such person does not exceed Rs 20 Lakhs.

The AMT is required to be paid at the rate of 18.5% as increased Surcharge and Health and Education cess. The AMT is payable only if the tax payable under the normal provision is lesser than AMT.

However in case of the person referred to therein, is a unit located in an International Financial Services Centre and derives its income solely in convertible foreign exchange, than AMT is required to be paid at the rate of 9% as increased Surcharge and Health and Education cess.

AMT will also apply to the assesses who are claiming profit linked deductions under Part C of Chapter VI-A i.e. under section 80-IA to 80RRB and under section 10AA and under section 35AD. However, deduction under section 80P, 80C to 80GGC, Section 80U and Section 80TTA shall not be added back. Further we have to say that if a person claims deduction under section 35AD, then he is not eligible to claim deduction under section 80-IA/ 80-IB/ 80-IC/ 80-ID.

The assessee has profits and gains of business or profession on presumptive basis under section 44AD, 44AE, 44B, 44BB, 44BBA and 44BBB. Section 44AD. 44ADA does not apply to taxpayers claiming profit linked tax holiday. Therefore, total income is computed taken into account profits and gains of business or profession on presumptive basis. If the assessee is eligible to take deduction under section 10AA or deduction under Chapter VI-A or 35AD, then such deductions shall be added back to the total income for computation of adjusted total income.

How to Calculate Adjusted Total Income?

Total income as per normal provision of Income Tax ActXXX
Add: Deduction under Part C of Chapter VI-A (Except Section 80P)XXX
Add: Deduction under section 10AA (Profits of SEZ units)XXX
Add: Deduction claimed, if any, under section 35ADXXX
Less: Depreciation as per Section 32(XXX)
Adjusted Total IncomeXXXX

What is AMT Credit?

As per section 115JD (1) The credit for tax paid by a person under section 115JC shall be allowed to him in accordance with the provisions of this section

(2) The tax credit of an assessment year to be allowed under sub-section (1) shall be the excess of alternate minimum tax paid over the regular income-tax payable of that year:

However where the amount of tax credit in respect of any income-tax paid in any country or specified territory outside India under section 90 or section 90A or section 91, allowed against the alternate minimum tax payable, exceeds the amount of the tax credit admissible against the regular income-tax payable by the assessee, then, while computing the amount of credit under this sub-section, such excess amount shall be ignored.

(3) No interest shall be payable on tax credit allowed under sub-section (1).

(4) The amount of tax credit determined under sub-section (2) shall be carried forward and set off in accordance with the provisions of sub-sections (5) and (6) but such carry forward shall not be allowed beyond the fifteenth assessment year immediately succeeding the assessment year for which tax credit becomes allowable under sub-section (1).

(5) In any assessment year in which the regular income-tax exceeds the alternate minimum tax, the tax credit shall be allowed to be set off to the extent of the excess of regular income-tax over the alternate minimum tax and the balance of the tax credit, if any, shall be carried forward.

(6) If the amount of regular income-tax or the alternate minimum tax is reduced or increased as a result of any order passed under this Act, the amount of tax credit allowed under this section shall also be varied accordingly.

Rationalization of provisions of the Act to promote the growth of co-operative Societies

1. Section 115JC of the Act, inter alia, provides for the alternate minimum tax (AMT) payable by co-operative societies, which is at the rate of 18.5%. However, vide the Taxation Laws (Amendment) Act, 2019, the Minimum Alternate Tax (MAT) rate for companies has been reduced to 15%. Therefore, in order to provide parity between co-operative societies and companies, it is proposed to modify sub-section (4) of section 115JC to reduce the AMT rate at which co-operative societies are liable to pay income-tax to 15%. Consequential amendment is also proposed in clause (b) of section 115JF in relation to the definition of “alternate minimum tax”.

2. These amendments will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

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