1072. Applicability of the provisions in respect of income paid or credited to a member of co-operative bank
Circular No. 9/2002 was issued by the Central Board of Direct Taxes on 11 September 2002. Its subject is 1072. Applicability of the provisions in respect of income paid or credited to a member of co-operative bank.
This grants an exemption or a relief under a provision that allows one. Read the conditions attached: an exemption notification is construed strictly, and a condition missed is the exemption lost.
Settles the overlap between clause (v) and clause (viia) of section 194A(3) for co-operative banks. A member of a co-operative bank receives interest on both time deposits and other deposits without deduction under section 194A, by force of clause (v), which exempts interest paid by a co-operative society to its member. Clause (viia), which excludes time deposits made on or after 1st July 1995, operates only for a non-member depositor. The circular also confines the word member: only a person who joined in the application for registration, or was admitted after registration under the bye-laws and rules, and who has subscribed to and fully paid for at least one share, is entitled to vote at general body meetings and is entitled to a share of profits, qualifies.
Representations asked whether a member of a co-operative bank could receive interest on a time deposit made on or after 1st July 1995 without deduction, and a further question was raised on nominal, associate and sympathiser members.
1072. Applicability of the provisions in respect of income paid or credited to a member of co-operative bank
1. Under section 194A of the Income-tax Act, 1961 tax is deductible at source from any payment of income by way of interest other than income by way of interest on securities. Clause (v) of sub-section (3) of section 194A exempts such income credited or paid by a co-operative society to a member thereof from the requirement of TDS. On the other hand, clause (viia) of sub-section (3) of section 194A exempts from the requirement of TDS such income credited or paid in respect of deposits (other than time deposits made on or after 1-7-1995) with a co-operative society engaged in carrying on the business of banking.
2. Representations have been received in the Board seeking clarification as to whether a member of a co-operative bank may receive without TDS interest on time deposit made with the co-operative bank on or after 1-7-1995. The Board has considered the matter and it is clarified that a member of a co-operative bank shall receive interest on both time deposits and deposits other than time deposits with such co-operative bank without TDS under section 194A by virtue of the exemption granted vide clause (v) of sub-section (3) of the said section. The provisions of clause (viia) of the said sub-section are applicable only in case of a non-member depositor of the co-operative bank, who shall receive interest only on deposits other than time deposits made on or after 1-7-1995 without TDS under section 194A.
3. A question has also been raised as to whether nominal members, associate members and sympathizer members are also covered by the exemption under section 194A(3)(v ). It is hereby clarified that the exemption is available only to such members who have joined in application for the registration of the co-operative society and those who are admitted to membership after registration in accordance with the bye-laws and rules. A member eligible for exemption under section 194A(3)(v) must have subscribed to and fully paid for at least one share of the co-operative bank, must be entitled to participate and vote in the General Body Meetings and/or Special General Body Meetings of the co-operative bank and must be entitled to receive share from the profits of the co-operative bank.
Circular : No. 9/2002, dated 11-9-2002.
In an order under section 201(1) and 201(1A) against a co-operative bank for not deducting on member time deposits, and in a member's return where credit for tax deducted at source is being reconciled.
Source: the Income Tax Department’s own published text — its page for this instrument.
