A Cooperative society works to provide funds and arrange loans to their individual members. Now, to work independently, society needs to get recognised by the Central Government. Here, the TDS on Payment – Cooperative Societies concept comes in.
Cooperative society prevails in all sectors of society. According to the Cooperative Society Act 1912, a cooperative society is considered “resident”. They follow certain principles of mutuality. A cooperative society is a voluntary association that intends to help each other. It was mainly formed to bring in debt provision in different ways. In this society, members raise the capital amount among themselves. The primary aim of a cooperative society is to provide funds and arrange loans to their individual members.
Cooperative societies are liable to deduct TDS from the source payment. TDS on Payment – Cooperative Societies covers a vast region of TDS payment. Now, to get an easy understanding of this topic, we need to split the topic into two halves. Let us first start with “TDS on Payment”.
What is TDS on payment?
TDS is an abbreviation for Tax Deducted at Source. TDS is a tax that a person is liable to pay to the Central Government. In other words, it is a tax that is levied periodically by the Government. The main objective of bringing in the concept of TDS is to collect Tax from the actual source of payment.
According to the Indian Income Tax Act of 1961, a person must deduct a certain amount while making payments like professional fees, salary, commission, interest, or rent. Furthermore, the same amount is supposed to be paid to the central Government. The concept of TDS on Payment – Cooperative Societies also comes under this law.
The TDS rate varies depending on various factors. These rates are set by the department of Tax itself. The person who is paying or deducting the TDS from the source is termed the deductor, and the person whose payment TDS is deducted is termed the deductor.
It comes under the responsibility of the deductor to deduct the TDS properly before making any payment and to send the same to the government account. TDS is independent of the payment mode: be it online or in cash, the same TDS will be deducted. Furthermore, this TDS is linked with the deductor and deductee’s PAN.
Now, let’s focus on the second half, which is cooperative societies. Let us know what actually is a cooperative society and how it is linked with TDS.
What is a Cooperative Society?
A cooperative society is a form of business organisation. These societies are developed to help their respective members. According to the Cooperative Society Act 1912, a cooperative society is considered “resident”. They follow certain principles of mutuality. A co-operative society is a voluntary association that intends to help each other. It was mainly formed to bring in debt provision in different ways. In this society, members raise the capital amount among themselves.
The weaker economic sections of the society autonomously form a cooperative society to avoid exploitation from the stronger economic sections. Co-operative societies are liable for TDS deduction from the source payment. There are different types of cooperative societies, namely consumer, producer, credit, housing, and marketing cooperative societies.
Forming a cooperative society brings in a lot of advantages. The advantages are that products are cheaper here. Product procurement is done by the producer, which further generates more profit. Members get the facility of availing quicker loans, and there is no fake marketing trick involved.
According to the co-operative societies Act 1912, a cooperative society needs a valid registration to work as a legal organisation. Since the cooperative society is active globally in every sector, registration becomes mandatory. Now, a huge protocol needs to be followed for the registration of a Co-operative society. Vakilsearch provides an easy procedure for online society registration. With Vakilsearch, cooperative societies can be registered seamlessly. One needs to follow three simple steps. The steps are:
- Contact the experts of Vakilsearch.
- Start providing the documentation and paperwork.
- Complete the registration process with the help of the experts.
How does the Cooperative Society deduct TDS?
Under sections 194C and 194J of the tax law, every cooperative society is liable to deduct TDS. TDS on Payment – Cooperative Societies is deducted periodically. According to section 194C – Payments to contractors, if the payment is for work pursuance or falls under any labour contract between a contractor and a co-operative society, then TDS must be deducted from the source payment. Housekeeping, security, gardening, facility management, and maintenance services are applicable for TDS deduction.
According to section 194J – Fees for technical or professional service, cooperative societies must deduct TDS while paying fees for technical or professional service to a local resident. Professional services may include interior decoration, accountancy, engineering, advertising, architectural, or engineering services. Apart from this, technical services include consultancy and managerial services. Charter accountant, lawyer, and Architect payments are applicable for TDS deduction.
The dates of deducting TDS should be maintained. The monthly due date of TDS payment Is set on day 7 of every month. Apart from salaries, TDS is supposed to be paid quarterly for the rest of the cases. Before opting for any payment cooperative, society must deduct the specified TDS amount. Now, there are different TDS rates imposed depending on the type of payment.
Section 194C specifies the following TDS rates:
TDS on Payment – Cooperative Societies is applicable for
- Single payment above ₹30000
- In between a year, aggregate payment above ₹100000
The rates are as follows:
- For HUF or any individual TDS, the rate is 1%
- For any corporate firm, the TDS rate is 2%
Section 194J specifies the following TDS rates:
- Aggregate payments above ₹30000 and the 10% TDS rate are imposed.
Penalty of TDS on Payment – Cooperative Societies
Under section 201A, the cooperative society is liable to pay the penalty over TDS if they fail to pay TDS on time. Two penalties can be imposed in such cases:
- In case of non-deduction of the TDS amount, 1% of interest per month is imposed from the due date.
- In case of non-payment of the TDS to the Government, 1.5% of interest per month is imposed from the due date.
A further penalty for not filling up the TDS return:
- Under section 234E, the deductor is charged ₹200 on a daily basis from the due date of filing the TDS return. However, the penalty amount can never be more than the TDS amount.
- Under section 271H, a penalty ranging between ₹10000 to 100000 is considered under incorrect details submission.
Conclusion
A co-operative society is a term that has been introduced previously in the business world. This society aims to protect the interest of weaker economic sections in society. A co-operative society is liable to register itself for its legal functionality. The registration process can be completed seamlessly with the help of Vakilsearch.
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