Circular No. 319

What it does

Confirms that a regional rural bank gets the section 80P deduction. Section 22 of the Regional Rural Banks Act, 1976 provides that for the purposes of the Income-tax Act, 1961 or any other enactment relating to tax on income, profits or gains, a regional rural bank shall be deemed to be a co-operative society. It follows that section 80P applies to these banks, and the deduction admissible under section 80P(2)(a)(i), for a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, is to be allowed in their assessments.

Why it was issued

A question arose whether regional rural banks governed by the Regional Rural Banks Act, 1976 could be treated as co-operative societies for section 80P.

Who it reaches

Regional rural banks
Sponsor banks and the Government departments dealing with their assessments
Assessing Officers assessing regional rural banks

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.22	s.20
s.80P	s.2, s.149, s.150

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

SECTION 80P l INCOME OF CO-OPERATIVE SOCIETIES
605. Whether regional rural banks can be treated as co-operative societies engaged in carrying on business of banking or providing credit facilities to its members
1. A question has arisen whether regional rural banks (to which the provisions of the Regional Rural Banks Act, 1976, apply) can be treated as co-operative societies for the purpose of section 80P.
2. There is a specific provision, namely, section 22 in that Act, which is to the following effect :
"For the purpose of the Income-tax Act, 1961, or any other enactment for the time being in force relating to only tax on income, profits or gains, a regional rural bank shall be deemed to be a co-operative society."
3. Therefore, the provisions of section 80P will also be applicable in respect of regional rural banks. In this view deductions admissible under section 80P (2)(a)( i) have to be allowed, in making income-tax assessments of these banks.
Circular : No. 319 [F. No. 178/47/81-IT(A-I)], dated 11-1-1982.

What to watch

The deeming comes from the Regional Rural Banks Act, 1976 and not from the Income-tax Act, so the answer depends on section 22 of that Act as it stands.
The circular points to the banking limb of section 80P(2)(a)(i); the other limbs of section 80P have their own conditions.
Section 80P has been amended since, including in its application to banking entities, so read it as it stands for the year in issue.

Where you meet it

In the assessment of a regional rural bank where the section 80P deduction has been refused on the footing that it is not a co-operative society.

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Circular No. 6 — 6/2010 dated 20 09 2010 20 September 2010
Notification No. 11 — Amendment of the Income-tax Rules under section 22 of the Income-tax Act, 1961 18 January 2008
Notification No. 264 — Amendment of the Income-tax Rules under section 2 of the Income-tax Act, 1961 23 October 2007
Circular No. 9 — Income from House Property 25 March 1969
Circular No. 13/2023 — Condonation of delay under clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961 for returns of incom 26 July 2023
Circular No. 18/2015 — Interest from non slr securities of banks reg. 2 November 2015

← Circular No. 320 · Circular No. 318 →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.

What this is