Deductions to be made in computing total incomeCentral
Section 150 of Income Tax Act 2025
18[Deduction in respect of income of federal co-operative.
- (1)If the gross total income of an assessee being a federal co-operative, in any tax year, includes any income by way of dividends received from its investment with any company, a deduction shall be allowed from such income, to the extent of the amount which,—
- (a)has arisen from such investment as recorded in its books of account on or before the 31st January, 2026; and
- (b)has been distributed by it to its members at least one month before the due date for filing the return of income under section 263(1).
- (2)The provisions of this section shall not apply to any tax year beginning on or after the 1st April, 2029.
- (3)For the purposes of this section, "federal co-operative" means a "federal co-operative" as defined in section 3(k) of the Multi-State Co-operative Societies Act, 2002 (39 of 2002) and notified as such by the Central Government.]
Summary
- A federal co-operative society can claim a tax deduction for dividend income received from its investments in any company.
- The dividend income must have arisen from investments recorded in the society's books of account on or before January 31, 2026.
- The co-operative must distribute this dividend income to its members at least one month before the deadline for filing its tax return under section 263(1).
- This deduction is temporary and will not apply to any tax year starting on or after April 1, 2029.
- A federal co-operative is defined under section 3(k) of the Multi-State Co-operative Societies Act, 2002, and must be notified by the Central Government.
Practical examples
1In December 2025, the National Dairy Federal Co-operative recorded a dividend of 500,000 rupees in its books of account from its shares in Opco. The society distributes this dividend to its members on September 30, 2026, which is more than one month before its return filing deadline of October 31, 2026. The society can deduct the entire 500,000 rupees for the tax year.
2In April 2029, the Union Agri Federal Co-operative receives a dividend of 100,000 rupees. Because the tax year starts on April 1, 2029, and the section does not apply to any tax year starting on or after April 1, 2029, the society cannot claim any deduction under this provision.
FAQ
1. What is the deadline for recording the investment in the books of account to qualify for this deduction?
The investment must be recorded in the books of account on or before January 31, 2026.
2. When must the federal co-operative distribute the dividend to its members to claim the deduction?
It must distribute the dividends to its members at least one month before the due date for filing its tax return under section 263(1).
3. Is this deduction available permanently?
No, this deduction is not available for any tax year beginning on or after April 1, 2029.
Test yourself
Q1.On or before which date must the investment be recorded in the books of account of the federal co-operative to be eligible for deduction?
Q2.This deduction is not available for any tax year starting on or after which date?
Q3.Which Act is referenced for the definition of a "federal co-operative"?