Co-operative Society Deductions under the Income Tax Act 2025: Sections 149 and 150
Under the Income Tax Act 2025, a co-operative society can deduct certain income from its gross total income under section 149. Some activities, such as marketing members' farm produce or giving credit to members, get the whole profit deducted. Other activities get a capped deduction of Rs 1,00,000 for a consumers' co-operative society and Rs 50,000 for any other society. Co-operative banks are outside section 149 unless they are primary agricultural credit societies or primary co-operative agricultural and rural development banks.
Section 150 is a separate, narrow relief for federal co-operatives on dividends from companies. This guide covers both sections as amended by the Finance Act, 2026 (effective 1 April 2026). It does not name the old-law section these replace, because that mapping is not in the Act text we worked from. The examples use tax year 2026-27.
Who can claim a deduction under section 149?
Section 149(1) applies to an assessee that is a co-operative society whose gross total income includes income listed in section 149(2). "Gross total income" is the total of all heads of income before deductions. The listed income is then allowed as a deduction in computing total income.
Section 149(5) switches the section off for any co-operative bank that is not a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Section 149(6)(b) takes the meaning of "primary agricultural credit society" from Part V of the Banking Regulation Act, 1949. Section 149(6)(c) defines a primary co-operative agricultural and rural development bank as a society whose area of operation is confined to a taluk and whose main object is long-term credit for agricultural and rural development.
Which income qualifies under section 149(2)?
| Clause | Society / income | Deduction |
|---|---|---|
| (2)(a) | Society that does one or more of: banking or credit to members; cottage industry; marketing members' agricultural produce; buying agricultural implements, seeds, livestock or other farm inputs to supply to members; processing members' produce without power; collective disposal of members' labour; fishing and allied activities | Whole profits and gains of business attributable to those activities |
| (2)(b) | Primary society supplying milk, oilseeds, cotton seed, cattle feed, fruits or vegetables raised or grown by its members to a federal co-operative society, the Government or a local authority, or a Government company or statutory corporation that supplies them to the public | Whole profits and gains of that business |
| (2)(c) | Society doing other activities (on its own or along with those above) | Profit attributable to them, up to Rs 1,00,000 if a consumers' society, and up to Rs 50,000 in any other case |
| (2)(d) | Interest or dividends from investments with another co-operative society | Whole of that income |
| (2)(e) | Letting of godowns or warehouses for storage, processing or marketing of commodities | Whole of that income |
| (2)(f) | Society that is not a housing society, an urban consumers' society, a transport society, or a society doing manufacturing with the aid of power, and whose gross total income is not more than Rs 20,000 | Interest on securities, and income from house property chargeable under section 20 |
The words "cotton seed, cattle feed" in clause (2)(b) were added by the Finance Act, 2026 from 1 April 2026. Clause (2)(d) was also substituted from that date, and now reads as a deduction for interest or dividends from investments with another co-operative society.
Does a Multi-State co-operative society get section 149?
Yes, if it is a "co-operative society" as defined in section 2(32). That definition covers societies registered under the Co-operative Societies Act, 1912, under the Multi-State Co-operative Societies Act, 2002, or under any other State or Union territory law for registering co-operative societies. The express mention of the 2002 Act was added from 1 April 2026.
Can interest on deposits with a co-operative bank be deducted under section 149(2)(d)?
Clause (2)(d) speaks of investments "with any other co-operative society". Section 2(31) defines a "co-operative bank" separately, and section 149(5) only restricts the deduction for a bank that is itself the claimant. The text does not say in so many words whether a deposit with a co-operative bank counts, and commentators differ. Treat it as an open point and check the position with your chartered accountant before claiming it.
How do I decide which clause applies?
A society can fall under more than one clause in the same year. The steps above are tested one activity at a time, and the deductions add up.
What extra condition applies to labour and fishing societies?
Section 149(3) applies to societies under clause (2)(a)(vi) (collective disposal of members' labour) and (2)(a)(vii) (fishing and allied activities). The deduction is available only if the society's rules and bye-laws restrict voting rights to these classes of members:
- individuals who contribute their labour or carry on fishing or allied activities;
- co-operative credit societies that give financial assistance to the society;
- the State Government.
What is the order of deduction if the society also claims section 138?
Section 149(4) says the deduction for income under (2)(a), (2)(b), (2)(c) and section 149(3) is worked out on the income included in gross total income after reducing any deduction the society is also entitled to under section 138 (profits of certain infrastructure and similar undertakings). In other words, section 138 comes off first, and section 149 applies to what is left of that business income.
How is the section 149 deduction calculated? Two worked examples
Example 1: a non-consumers' society with mixed activities (tax year 2026-27). Assumptions: a primary society that markets members' paddy and also runs a general store. It is not a consumers' society and has no section 138 deduction.
| Step | Item | Amount (Rs) |
|---|---|---|
| 1 | Profit from marketing members' produce (2)(a)(iii) | 6,40,000 |
| 2 | Profit from general store (2)(c) | 3,40,000 |
| 3 | Gross total income (1 + 2) | 9,80,000 |
| 4 | Deduction on step 1: whole amount | 6,40,000 |
| 5 | Deduction on step 2: lower of 3,40,000 and the Rs 50,000 cap | 50,000 |
| 6 | Total deduction (4 + 5) | 6,90,000 |
| 7 | Total income (3 minus 6) | 2,90,000 |
If the same general store was run by a consumers' co-operative society, the cap in step 5 would be Rs 1,00,000, the deduction Rs 7,40,000 and total income Rs 2,40,000.
Example 2: a credit society with investment and godown income (tax year 2026-27). Assumptions: a credit society (not a bank) that lends to members, deposits surplus funds with a district co-operative society, and lets out a godown. It also earns Rs 80,000 from a stationery counter open to the public. It is not a consumers' society.
| Item | Income (Rs) | Deduction (Rs) |
|---|---|---|
| Profit from credit to members, 2(a)(i) | 18,00,000 | 18,00,000 |
| Interest from deposit with another co-operative society, 2(d) | 2,00,000 | 2,00,000 |
| Godown letting income, 2(e) | 1,50,000 | 1,50,000 |
| Stationery counter profit, 2(c) | 80,000 | 50,000 (cap) |
| Total | 22,30,000 | 22,00,000 |
Total income is Rs 22,30,000 minus Rs 22,00,000, which is Rs 30,000. The Rs 30,000 left over from the stationery counter stays taxable. These figures assume all the income above falls in the head and clause shown. Check how each receipt is actually classified before relying on a similar split.
Real-life examples
Meena's dairy society. Meena is secretary of a primary village society whose members are dairy farmers. It collects members' milk and supplies it to a state-level federal milk co-operative society. Under section 149(2)(b), the whole profit from that supply is deductible. If the same society also ran a small fertiliser counter for the public, only that counter's profit would fall into the capped clause (2)(c).
Ravi's fishing society. Ravi's society catches and markets fish, which is a clause (2)(a)(vii) activity. Its bye-laws, however, let any member vote, including people who do not fish. Because section 149(3) requires voting rights to be limited to fishing members, credit societies that fund it and the State Government, the society risks losing the deduction until the bye-laws are checked and, if needed, amended.
A district co-operative bank. A district co-operative bank is a co-operative bank but not a primary agricultural credit society. Section 149(5) says section 149 does not apply to it, however much of its work is lending.
What does section 150 give federal co-operatives?
Section 150 allows a deduction to a federal co-operative on dividends received from companies in which it has invested. The deduction is limited to the part of the dividend that meets both conditions in section 150(1):
- it arose from an investment recorded in the society's books of account on or before 31 January 2026; and
- it was distributed to the society's members at least one month before the due date for filing the return of income under section 263(1).
Section 150(2) says it does not apply to any tax year beginning on or after 1 April 2029. Under section 150(3), a federal co-operative is one defined in section 3(k) of the Multi-State Co-operative Societies Act, 2002 and notified as such by the Central Government. Before 1 April 2026, section 150 only held the definitions now placed in section 149(6).
Common mistakes
- Applying the Rs 50,000 cap to the whole profit. The cap in clause (2)(c) covers only activities outside (2)(a) and (2)(b). Profit from listed activities is deducted in full.
- Using the wrong cap. Rs 1,00,000 is for a consumers' co-operative society. Every other society gets Rs 50,000.
- Ignoring the voting-rights rule. Labour and fishing societies lose the deduction if their bye-laws do not restrict voting as section 149(3) requires.
- Treating a co-operative bank as eligible. Only a primary agricultural credit society or a primary co-operative agricultural and rural development bank escapes the section 149(5) exclusion.
- Forgetting the order with section 138. Under section 149(4), the section 138 deduction is reduced first.
- Missing the section 150 timing. Dividends distributed to members less than one month before the return due date do not qualify.
Quick reference
| Point | Detail |
|---|---|
| Cap, consumers' society, other activities | Rs 1,00,000 (s.149(2)(c)(i)) |
| Cap, any other society, other activities | Rs 50,000 (s.149(2)(c)(ii)) |
| Small-society limit for 2(f) | Gross total income not more than Rs 20,000 |
| Section 150 investment cut-off | Recorded in books on or before 31 January 2026 |
| Section 150 distribution timing | At least one month before the section 263(1) due date |
| Section 150 sunset | Tax years beginning on or after 1 April 2029 |
Where this is in the Act
- Section 149(1) and (2): deduction and the list of qualifying income
- Section 149(3): voting-rights condition for labour and fishing societies
- Section 149(4): order of deduction with section 138
- Section 149(5): co-operative banks excluded
- Section 149(6): definitions (consumers' society, PACS, PCARDB)
- Section 150: dividends of federal co-operatives
- Section 20: house property income referred to in clause (2)(f)
For other deductions in the same part of the Act, see our overview of deductions from total income.
How do CA firms keep track of co-operative society clients?
For a CA firm, the hard part is usually not the arithmetic. It is knowing which clients are co-operative societies, what each one does, and whether the bye-laws and filing dates are in order. Finexo's practice management software keeps client details, tasks and due dates in one place so these checks do not slip. It does not compute the deduction or file returns for you.
This article explains the Income Tax Act 2025 (as amended by the Finance Act, 2026). It is general information, not tax advice. Confirm the position for a specific society with a qualified chartered accountant.
Frequently Asked Questions
What is the deduction for co-operative societies under the Income Tax Act 2025?
Section 149 allows a co-operative society to deduct certain income from its gross total income. Listed activities such as marketing members' produce or giving credit to members get the whole profit deducted. Other activities are capped at Rs 1,00,000 for a consumers' society and Rs 50,000 for any other society.
Can a co-operative bank claim a deduction under section 149?
Not in general. Section 149(5) says the section does not apply to a co-operative bank unless it is a primary agricultural credit society or a primary co-operative agricultural and rural development bank.
What is the limit on the deduction for other activities of a co-operative society?
Under section 149(2)(c), profit from activities outside clauses (a) and (b) is deductible up to Rs 1,00,000 for a consumers' co-operative society and up to Rs 50,000 for any other society.
Is interest on deposits with another co-operative society deductible?
Yes. Section 149(2)(d) allows the whole of any interest or dividend a society earns from its investments with another co-operative society. Section 149(2)(e) similarly allows the whole of income from letting godowns or warehouses.
What is section 150 of the Income Tax Act 2025?
Section 150 gives a federal co-operative a deduction on dividends from companies, limited to investments recorded in its books on or before 31 January 2026 and distributed to members at least one month before the return due date under section 263(1). It does not apply to tax years starting on or after 1 April 2029.
Is a Multi-State co-operative society covered by section 149?
Yes, where it is a co-operative society under section 2(32), which expressly includes societies registered under the Multi-State Co-operative Societies Act, 2002 from 1 April 2026. The activity and cap rules in section 149(2) then apply as for any other society.
Does section 149(2)(d) cover interest on deposits with a co-operative bank?
The clause refers to investments with another co-operative society and the Act does not say expressly whether a co-operative bank is included. The point is debated, so confirm it with a chartered accountant before claiming it.