Explain the basic principles followed in the taxation of the income of cooperative societies

Basic principles of taxing co-operatives

• Taxed on incomes from independent activities e.g. rent
• The basic notion underlying the new code of taxation is that a co-operative society is a body
• Corporate having its own existence, separate from that of its members. A co-operative society is, therefore, deemed to have its own income, regardless of the consideration that some of that incomemay be derived from transactions with its own members. The current law sanctions the deduction from the income of the co-operative society appropriations to profit made by it from its members.
• Corporate rate = 30%
• Tax on gross investment income
• A different basis of taxation has been laid down for credit and savings societies. These societies will be liable to tax generally on only their gross investment income, that is on interest and dividends derived from normal investment of surpluses.
• Expenses not from incomes deducted.
• Interest income deducted from members loans not taxable