Tax liability

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A resident association comprising of 30 flats has the following recceipts and payment. a) Common maintainance receipts 5,00,000 Less: b) Common expenditure(2,00,000) Depreciation on assets(25,000) 225000 (5,00,000-2,25,000= 2,75,000) Add: Interest on bank deposits 45,000 (2,75,000+45,000= 3,20,000) Kindly let me know tax liability.
Replies (1)

NIL.

A) Residential Apartment Welfare Associations are categorised as Associations of Persons (AOP) under the Income Tax Law. 

B) The governing concept for applying income tax laws to the Association of Persons is the “Concept of Mutuality”. This concept means that the contributors to a fund and the beneficiaries of the fund are identical. This in turn implies that there is no scope for individual profits or gains. Any surplus generated in this fund which is income over expenditure is held by the association for future utilization to the benefit of the contributors.
== Complete tax exemption is given to funds/surplus funds to which the “Concept of Mutuality” applies.
== Income NOT subject to tax
a) Contribution from Members
b) Interest earned from Co-operative Banks
c) Dividend
d) Rentals received from members for utilizing facilities
== Income subject to tax
a) Interest earned from banks other than co-operative banks
b) Rental Income from Advertisement Hoardings
c) Rental from Mobile / Cable Towers etc
d) Rentals received from non members for utilizing facilities


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