Taxation of flat owners association
This query is : Resolved
28 May 2013
suppose the flat owners association is having excess of income over expenditure and interest on fdr how to show these items in the it return? which form is to be used? if the income is exempted under what section it is to be claimed
vsk
vsk
28 May 2013
1) status of the association is 'body of individuals'.
ii) excess of income is taxable since income generating activity will not come with in the ambit of 'concept of mutuality'.
iii) interest on FDR is also taxable.
iv) ITR-5 is the appropriate form.
ii) excess of income is taxable since income generating activity will not come with in the ambit of 'concept of mutuality'.
iii) interest on FDR is also taxable.
iv) ITR-5 is the appropriate form.
01 June 2013
the association is registered as society. then if there is any change in the tax position. can the association (society) go for 12 A exemption
01 June 2013
i) Taxed at the graded rates applicable to 'individuals'. Please see part 1 paragraph A (1) for the tax rates.)
ii) 12A registration will not get generally.
ii) 12A registration will not get generally.
01 June 2013
what is the applicable itr and what is the basis for applying individual tax rates
26 July 2025
Here’s a clear breakdown of the **taxation of a Flat Owners' Association (FOA)** or **Resident Welfare Association (RWA)** in India, especially when:
* It is **registered as a society**, and
* It has **excess income over expenditure** and **interest on FDRs**.
---
### ✅ **1. Legal Status and Applicable Tax Rates**
* **Status under Income Tax Act**: A Flat Owners’ Association is typically treated as a **Body of Individuals (BOI)** or **Association of Persons (AOP)** — depending on structure.
* If registered as a **society**, it is still taxed as **AOP/BOI**.
* **Tax rates**: If **none of the members have income exceeding the basic exemption limit**, the society can claim **individual slab rates**.
* If **even one member** is above the exemption limit, **maximum marginal rate (MMR) of 30%** is applicable on total income (Section 167B).
---
### ✅ **2. Taxability of Income**
* **Income from Members** (e.g. maintenance charges, security charges):
**Not taxable** due to the **principle of mutuality**.
* **Income from Non-Members** or interest (e.g. FDR interest):
**Fully taxable**, as mutuality does not apply to income from external sources.
* **Excess of income over expenditure** may also be taxable **if it relates to non-member activities**.
---
### ✅ **3. Section 12A and Exemption Eligibility**
* **Section 12A** applies to **charitable or religious trusts** only.
* A flat owners’ association **is not engaged in charitable purposes** (as defined in Section 2(15)), so it is **not eligible for 12A registration**.
---
### ✅ **4. Which ITR to File?**
* Use **ITR-5** (for AOPs, BOIs, and societies not claiming exemption under 11/12).
* In the ITR:
* Show **interest income** under “Income from Other Sources”.
* Show **other income** (not covered by mutuality) under “Business/Profession” if applicable.
* **Claim mutuality** on member contributions (not shown as income).
---
### ✅ **5. Summary Table**
| Particular | Tax Treatment |
| ------------------------------ | ------------------------------------------------------------------- |
| Maintenance from members | Not taxable (mutuality) |
| Interest on FDR | Taxable (income from other sources) |
| Excess income from non-members | Taxable |
| Registration as Society | No exemption under Section 12A |
| Tax Rates | Individual rates if all members below basic exemption; else 30% MMR |
| ITR Form | **ITR-5** |
---
### 📌 **Tip:**
Maintain **separate books** for member and non-member income to clearly justify mutuality if assessed.
If you’d like help filling out ITR-5 or preparing a sample computation, I can walk you through it.
* It is **registered as a society**, and
* It has **excess income over expenditure** and **interest on FDRs**.
---
### ✅ **1. Legal Status and Applicable Tax Rates**
* **Status under Income Tax Act**: A Flat Owners’ Association is typically treated as a **Body of Individuals (BOI)** or **Association of Persons (AOP)** — depending on structure.
* If registered as a **society**, it is still taxed as **AOP/BOI**.
* **Tax rates**: If **none of the members have income exceeding the basic exemption limit**, the society can claim **individual slab rates**.
* If **even one member** is above the exemption limit, **maximum marginal rate (MMR) of 30%** is applicable on total income (Section 167B).
---
### ✅ **2. Taxability of Income**
* **Income from Members** (e.g. maintenance charges, security charges):
**Not taxable** due to the **principle of mutuality**.
* **Income from Non-Members** or interest (e.g. FDR interest):
**Fully taxable**, as mutuality does not apply to income from external sources.
* **Excess of income over expenditure** may also be taxable **if it relates to non-member activities**.
---
### ✅ **3. Section 12A and Exemption Eligibility**
* **Section 12A** applies to **charitable or religious trusts** only.
* A flat owners’ association **is not engaged in charitable purposes** (as defined in Section 2(15)), so it is **not eligible for 12A registration**.
---
### ✅ **4. Which ITR to File?**
* Use **ITR-5** (for AOPs, BOIs, and societies not claiming exemption under 11/12).
* In the ITR:
* Show **interest income** under “Income from Other Sources”.
* Show **other income** (not covered by mutuality) under “Business/Profession” if applicable.
* **Claim mutuality** on member contributions (not shown as income).
---
### ✅ **5. Summary Table**
| Particular | Tax Treatment |
| ------------------------------ | ------------------------------------------------------------------- |
| Maintenance from members | Not taxable (mutuality) |
| Interest on FDR | Taxable (income from other sources) |
| Excess income from non-members | Taxable |
| Registration as Society | No exemption under Section 12A |
| Tax Rates | Individual rates if all members below basic exemption; else 30% MMR |
| ITR Form | **ITR-5** |
---
### 📌 **Tip:**
Maintain **separate books** for member and non-member income to clearly justify mutuality if assessed.
If you’d like help filling out ITR-5 or preparing a sample computation, I can walk you through it.
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