{"id":3074,"date":"2013-01-17T13:26:38","date_gmt":"2013-01-17T07:56:38","guid":{"rendered":"http:\/\/apartmentadda.com\/blog\/?p=3074"},"modified":"2023-11-02T03:47:44","modified_gmt":"2023-11-02T03:47:44","slug":"is-income-tax-applicable-for-society-fixed-deposits-learn-about-the-doctrine-of-mutuality","status":"publish","type":"post","link":"https:\/\/adda.io\/blog\/2013\/01\/is-income-tax-applicable-for-society-fixed-deposits-learn-about-the-doctrine-of-mutuality\/","title":{"rendered":"Income Tax on Society FD and the “Doctrine of Mutuality”."},"content":{"rendered":"

A Residential Society*<\/span> collects Funds from its Members and pays for Common Expenses from such Funds. The Society<\/a> does not pay Income Tax for any Excess of this Income over Expenses.\u00a0 This is allowed due to the Doctrine of Mutuality<\/a>.<\/p>\n

At the end of a Financial Year, any Excess Fund , typically termed as Reserve Fund<\/a>, is invested in Fixed Deposits with a Bank, towards future exigencies.<\/p>\n

Same is done with Corpus Fund<\/a>, Sinking Fund<\/a>, Repairs and Maintenance Fund<\/a> etc.<\/p>\n

The Bank pays annual Interest on these Fixed Deposits, like any other Fixed Deposits.<\/p>\n

Question:<\/strong> Should Income Tax be applicable on the Interest paid by the Bank for Fixed Deposits by Residential Societies?<\/strong><\/p>\n

Answer: If you go by Supreme Court’s definition of “Doctrine of Mutuality” as clarified in below Case, the answer is YES.<\/strong><\/p>\n

Make sure you have your Association \/ Society Fixed Deposits managed using ADDA! The ADDA ERP<\/a> has FD MANAGEMENT feature that keeps all FD details in one place, sends automatic reminders to the Treasurer for the renewal. Treasurers can come and go, complete visibility and accountability remains for your Community’s Fixed Deposits!<\/p><\/blockquote>\n

FACT:<\/strong> In Mumbai almost every Society has Fixed Deposits with Saraswat Co-operative Bank or District Co-Operative banks. The core benefit being Interest on Fixed Deposits are exempted from TDS. However in Mumbai, the Co-operative Housing Society (CHS) is also mandated to become Member of\u00a0 The District Central Co- operative Bank of the District. The understandable purpose of this membership is to bring the Bank and the Society under the Concept of Mutuality.<\/p>\n

In other Indian cities, this is not a well known fact, nor is the Society registered in The District Central Co-operative Bank, so as to utilize such benefits. Residential Societies open Bank Accounts in any Bank per their preference, including Private Banks.<\/p>\n

\"Tax

Should Interest on Society FDs be Taxable?<\/p><\/div>\n

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Table of Contents<\/p>\n