Section 80P: Tax Deduction for Cooperative Societies

Applicable to: Registered Cooperative Societies

This section provides full or partial tax exemptions to encourage cooperative movements in agriculture, banking, and rural development.

Key Features (AY 2025-26)

1.   Eligible Societies & Deductions

2.  Special Cases

• Cooperative Banks:
  • Rural Banks:100% exemption
  • Urban Banks:No deduction (taxable as per normal rates)
• Interest Income:Exempt if from investments with other cooperatives

3.  Non-Eligible Incomes

❌ Income from non-members (except for certain marketing societies)

❌ Profits from non-cooperative activities

Illustrative Examples

Case 1: Agricultural Marketing Society

• Annual Profit:₹15 lakh (from member farmers)
• Tax Saved (@30%):₹4.5 lakh

Case 2: Urban Cooperative Bank

• Annual Profit:₹2 crore
• Taxable as normal(no 80P benefit)

Required Compliance

✅ Registration Certificate (under Cooperative Societies Act)

✅ Separate Books for exempt/non-exempt activities

✅ ITR Filing: Must disclose exempt income

Comparison with Similar Sections

FAQs

Q: Can housing societies claim full exemption?
A: No, only ₹10,000/year for maintenance income.

Q: Are multi-state cooperatives eligible?
A: Yes, if registered under respective laws.

Q: Is GST applicable to exempt income?
A: Yes, GST and 80P are separate regimes.

Pro Tips

1. Audit Threshold:Mandatory if turnover > ₹1 crore
2. Member Verification:Ensure income is primarily from members
3. Combine with State Subsidiesfor additional benefits

Section 80P significantly reduces tax liability for genuine cooperatives serving members. Key takeaways:

• Agricultural/marketing societies benefit most
• Urban banks excludedpost-2006 amendments
• Documentation is criticalfor claims