Society, Trust, Firm & Cooperative Society Taxation
Taxation of Cooperative Societies. A cooperative society means, a society registered or deemed to be registered under any law relating to cooperative societies for the time being in force in any State or under the Central act. Cooperative societies may be governed by the respective State cooperative societies Act or by the Multi-State Cooperative Societies Act, 2002. The societies whose main objective is to serve the interests of its members in a particular State, are governed by the Cooperative Societies Act of that particular State. While, a Society whose main objectives is to serve the interests of its members in more than one State, are governed by the Multi-State Cooperative Societies Act, 2002.
Taxation for Charitable Trust
THE TAX COMPUTATION OF A CHARITABLE TRUST IS BASED ON CASH FLOW.IT IS NOT BASED ON THE RESULT OF INCOME AND EXPENDITURE ACCOUNT. 85% OF TOTAL INCOME TO BE UTILIZED IN THE YEAR OF RECEIPT FOR ITS OBJECTS WITH IN INDIA. WHILE WE CALCULATING THE REMAINING 15% EXEMPTED PORTION,THE CALCULATION IS BASED ON THE TOTAL INCOME CREDITED DURING THE YEAR. THE ITO TOOK THE 15% ON THE NET SURPLUS OF INCOME AND EXPENDITURE AND MADE THE ASSESSMENT ACCORDINGLY.
Tax on Income of a Partnership Firm and LLP
Income Tax at a flat rate of 30% is levied on Partnership Firms and LLP’s. Computation of taxes as per Income Tax Slab Rates is not allowed as the benefit of Slab Rates is only available to Individuals and. Education Cess @ 2% and SHEC @ 1% would also be required to be paid. Moreover, in case the income of the partnership firm is more than Rs. 1 Crore in any financial year, Surcharge @ 10% would also be payable.
Capital Gains arising from the sale of any asset by the partnership firm are taxable under Section 112. Moreover, in case of sale of shares and mutual funds, in case the period of holding is less than 1 year – the income would be taxable under Section 111A at a flat rate of 15% and in case the period of holding of shares is more than 1 year – the income would be exempted from the levy of tax under Section 10(38).
Remuneration and Interest is allowed to be paid to the partners. However, the tax deduction for remuneration and interest paid to the partners is allowed subject to the limits and conditions specified in Section 40(b)
Remuneration and Interest received by the partners shall be taxed in their hands as income under head PGBP. However, the and interest which have not been allowed under Section 40(b) or any other section shall not be added to the income of the partners.
The share of the partners in the total income of the firm is exempt in the hands of the partners as the same has already been taxed in the hands of the partnership firm.
Losses of the firm should be carried forward and not allowed to be allocated to the partners.
Deductions under Chapter VI-A would be allowed from the Gross Total Income only for Donations or in case the business falls under the specified category of business.
In case the partnership firm is unable to pay the tax dues, the partners can be held liable for recovery of the tax dues.
It is pertinent to note that although LLP’s are treated in the same manner as Partnerships, there is only one section which does not apply to LLP’s and applies to Partnership Firms which is Section 44AD. LLP’s cannot claim benefits of Section 44AD by using Presumptive Taxation.