Chartered Accountant · ICAI M.No. 153926 · FRN 136869W · Reviewed on 13 October 2026
Mutuality: what stays outside tax
Maintenance charges, repair-fund and sinking-fund contributions, transfer premium within bye-law limits collected from members — these are the society dealing with itself, and the surplus from them is not income. The line breaks where a non-member enters: rent from a mobile tower on the terrace, hoarding income, parking charges from outsiders — all taxable, mutuality or not.
The interest question, honestly stated
Societies park funds in fixed deposits. Interest from a co-operative bank is routinely claimed as fully deductible under section 80P(2)(d) — but be aware the position is litigated: since the Supreme Court’s Totgars decision, departments periodically argue that interest on surplus funds is “income from other sources” outside the deduction. Tribunals have largely allowed 80P(2)(d) for co-operative-bank interest, and societies keep claiming it — with the claim disclosed, computed and defensible. Interest from a nationalised or private bank FD is simply taxable.
Rates, returns and the practical setup
A society files ITR-5 and is taxed at the slab rates applicable to co-operative societies (with the optional flat 22% regime of section 115BAD as an alternative worth computing). Keeping co-operative-bank deposits and nationalised-bank deposits in separate ledgers makes the 80P working a five-minute exercise instead of an argument. From Tax Year 2026-27 the same structure continues under the Income-tax Act, 2025. Our society audit practice runs the computation alongside the section 81 audit each year.