Income Tax on Housing Society Explained


Paying income tax is imperative and ensures the smooth running of the government machinery. But, there is a misconception among people that housing societies are exempt from paying taxes. In reality, there are several ways in which housing societies earn their income and most of these are subject to direct taxation. Let us examine in detail the income tax levied on housing societies. 

Contribution from the members            

The society needs money to keep its operations running. The lifts need to be regularly serviced and the water and electricity bills to be paid. Then there are the municipal taxes, security charges, among others. The money to pay all these charges is collected from the members. This income generate surplus which is non-taxable on the grounds of Concept of Mutuality.

Rent received from advertisement hoardings and mobile towers

Any money that is collected as rent from advertisement hoardings and mobile towers is subject to tax under the head income from other sources and head income from House Property, respectively. However, in case of mobile towers, there is a standard deduction of u/s 24(a) @30% of the rent.

Interest charged on the outstanding dues of members

The society can charge interest on the outstanding dues of the members. But the money is not considered taxable on the grounds of concept of mutuality.

Parking charges

The money collected as parking charges from the members is not subject to taxation on the grounds of concept of mutuality. However, in case the housing society comprises shops and entertainment zones which are open to outsiders, then the money that is collected from the non-members of the society will be subject to taxation.     

Open spaces and terraces

Here the rules are similar to that of parking charges. If open spaces or terraces are rented out to outsiders to organise weddings, parties etc, then the money received will be subject to taxation. However, if used by the members of the society, then no tax will be collected.



Interest earned on investments

Any interest that the housing society earns from an investment that is made in a cooperative bank is non-taxable. And, under section 80P (d) qualifies for deduction @ 100 percent. But, in case of other interest income on investments, the tax has to be paid.

Thus, it is imperative for the housing societies to pay taxes as most of the income generated is subject to taxation. You can pay direct tax online and avoid the hassles of standing in long queues. 




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