Taxman Rejects Exemption on Interest Income of Several Housing Societies

Several co-operate housing societies are seeing a higher tax outgo, after the revenue department sought additional taxes on income they generated during the year.

Housing societies have been claiming exemptions on income earned from other co-operatives, which in most cases is interest income on savings held in fixed deposits with cooperatives banks. They have been claiming that the interest income earned from such fixed deposits with other co-operatives cannot be taxed as per the tax law.

But the tax department has rejected hundreds of such exemptions sought by housing societies this year, said tax experts.

The questions are over what type of income is tax-free and what’s not.

“In respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income shall be exempt as per the income tax law,” reads the income tax Act. Tax experts said the I-T department seems to have taken the view that only “interest” and “dividends” are exempt. Also, “interest” could be separate from the “interest income” that co-operative societies receive from fixed deposits.

In most cases, housing societies may have a way out of the situation, but they may not know how exactly to go about it, they said. S-ET

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