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A question of law whether a Co-operative Bank is liable to deduct tax at source under the provisions of Section 194A (1) r.w.s. 194A (3) (v) of the Income Tax Act, 1961 (as amended), from the interest paid by it to the co-operative societies, is still remaining unanswered. The provisions of the said
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No, the liability depends on recent amendments. Since 2020, co-operative banks with total sales, gross receipts, or turnover exceeding fifty crore rupees are bound to deduct TDS on interest paid to other co-operative societies.
Previously, Section 194A(3)(v) provided an exemption, meaning co-operative societies paying interest to members or other co-operative societies were not subject to TDS.
The 2015 amendment made co-operative banks liable to deduct TDS on interest paid to depositors, except for interest paid to other co-operative societies, due to a change in the exemption clause.
The 2020 amendment introduced a proviso that removes the TDS exemption for co-operative banks if their turnover exceeds fifty crore rupees and the interest paid exceeds certain thresholds.
Yes, Section 194A(3)(iii) provides a safeguard for co-operative societies engaged in banking, but whether a specific society qualifies as being 'engaged in carrying on the business of banking' is a point of debate.
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