Apartment owners association plays vital role in maintenance of apartment and works for welfare of its members. Apartment owners association may or may not be registered but it is always recommended to register the association to sue or defend any legal action. Apartment owners association collects maintenance charges from its members and earns revenue from advertising, distributing brochure, pamphlets etc. The apartment owners association has obligation to pay income tax as applicable in the case of an individual. Apartment owners association is also eligible for deduction and tax rebate as in case of individual.
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Association of Persons
Under Income Tax Law, apartment owners association is categorized as Association of Persons (AOP). An association of persons (AOP) under the Income Tax Act is an entity or unit of assessment. But, an AOP does not mean any and every combination of persons. It is only when, they associate themselves in an income-producing activity that they become an association of persons. An AOP implies a voluntary getting together for a common design or combined will to engage in an income producing activity.
Income Tax exempt on mutuality basis
Associations such as apartment owners’ association or any mutual association run on subscriptions obtained from members for maintenance, mutual help, and recreations, whether periodically made or received as entrance fee or as ad hoc contributions from time to time are all exempt on mutuality basis in the view that no one can make income out of himself. The principle of mutuality derives from the concept that income earned by a person from external sources is taxable. Thus income derived from oneself cannot be treated as income thus cannot be taxed.
Exemption of Income Tax
The concept of mutuality means that there is no scope for individual profits or gains. Complete tax exemption is given for funds or surplus where the concept of mutuality applies. There are incomes which does not attract tax for apartment owners association. Following are income not subject to tax.
- Interest Earned from Co-operative Banks: Apartment owners association has to pay income tax on interest earned on any investment made in banks or other financial institutes except co-operative banks. Interest earned from investment made in co-operative bank qualifies for 100 per cent deduction under Sec 80P (d).
- Income earned from its member’s contribution: Apartment owners association collects fee for maintenance of apartment, electricity charges, maintenance of common area, interest or fines received from defaulting members etc. The contribution or any surplus fund is carried forward to next fiscal year and no income tax is charged on such contributions.
- Rentals received from members: The apartment owners association can rent out common facilities in apartment to its members for a fee. Common facilities can be community hall, open terrace and other facilities available in apartment. The rental or fee received from members is not taxable under the concept of mutuality.
- Dividend from Indian Companies: Under Sec 10 (33), Dividend from Indian Companies, Income from units of Unit Trust of India and Mutual Funds, and income from Venture Capital Company/fund are exempted from income tax. Divided received from Co-operative banks are qualified for 100 per cent tax exemption under Sec 80P (d).
- Exemption on donations made: Apartment owners association can enjoy 100 per cent tax deduction on donations made for medical relief set up by state government, donations made to national sports fund, prime minister’s national relief fund, for approved educational institution of national importance etc.
Tax Rebates (Sec 88 and 88B)
Certain payments which qualify for such tax rebate are:-
- Subscription to the National Savings Scheme of the Government.
- Contribution to a statutory or recognized provident fund, approved superannuation fund or public provident fund.
- Payment in a ten year or fifteen year account under the Post Office (Cumulative Time Deposit) Scheme.
- Subscription to the National Savings Certificate (VIII issue).
- Subscription to equity shares or debentures or to units of any mutual fund approved by the Board.
Apartment owners association has to get PAN in the name of association. Concept of mutuality helps apartment owners association to get 100 per cent tax relief on income earned from contribution and rentals paid by its members. But apartment owners association will have to pay income tax for rent received from non-members, advertisement of hoardings, rents from mobile or cable tower etc. Interest earned from deposits or interest on investments other than co-operative bank will attract income tax. If an apartment owners association does not have taxable income after deduction available, it should be proved and association has to file income tax return. It is always recommended to audit the books of accounts and maintain books of record for smooth functioning of association’s day-to-day affairs.
Tags: apartment owners association, apartment owners association income tax excemption, exemption of income tax, income tax for apartment owners association, Income tax for RWA, rwa income tax excemption
Excellent article. Now that The Indus Sunshine Owners’ Association is formed and registered, these rules will prove to be useful to manage Association’s funds without paying income tax.
Our Association suffered a loss of Rs. 1.28 lacs for the year 2008-09 in maintenance a/c. This loss was adjusted with FD interest income from a private sector bank. Wheher Assocaition will have to pay any tax on FD int of Rs. 1.29 lacs setting aside maintenance loss of Rs. 1.28 lacs.
Although I have registered myslf in commonfloor, but may I know are you all parsvnath planet owners.
It sound ambiguous, since the project is still stagnant and in construction stage at Lucknow….
No construction work resumed…how can you talk about tax and income….
YOU HAVE MENTIONED ABOUT LUCKNOW PROJECT. CAN YOU GIVE MORE DETAILS.THANKS
Good informative and useful article. You have mentioned about Apartment Oweners Association..but how does it apply to Co-Operative Society formation of flat owners…let me on this.
thanks…
Good informative and useful article. You have mentioned about Apartment Oweners Association..but how does it apply to Co-Operative Society formation of flat owners…let me on this.
thanks…
Hi ,
I have availed housing loan from Dewan Housing Finance Corporation Limited (DHFL), Borivali branch for Rs. 1278000/- for under construction flat. Till now the partial amout of loan has been disbursed by DHFL on pro-rata basis as property is still under construction. Hence, I have paid only for Pre EMI interest to DHFL.. And hence, DHFL would not issue Provisional Certificate for the same. DHFL can provide statement for payments I have made. Kindly advise wheather interest paid by me will be excempted from indian income tax.
Thanks & regards,
Narendra Patil
Mobile – 09869232067.
Tel : 022-67303064.
It is very important article i want to give tanks to share this
Is the interest earned on the Corpus fund deposit in a National bank (eg., Rs 20,000 fund collected from each of the apt owners for a long term use) is taxable?
KS
Hi
Pls confirm under which category the Owners Association need to Apply for PAN Card
a) Association of Persons ( A)
b) Association of Persons (TRUSTS)
What documents are required for applying for Pan Card of the Apartment owners association.? Who signs the form ?
Yes, I also want to ask same question as S.G. Athavale, what documents are needed in applying for Pan Card of the Apartment owners association?
I am residing in a flat at Trichy, Tamil Nadu and we are going to start Apartment owners association. Out of 178 flats, we are having only 65 car parking. Can we restrict only those having car parking space can be allowed to be parked inside. Others cannot park inside the apartment compound, due to want of face. Whether it is legally permitted.
Kindly clarify.
N. Manoharan
how i wish that the occupants wont be affected to the taxes of the owners of the apartments, so that it will be easy to them to rent ..
I was wondering if you could tell us where the OA needs to apply for a PAN card?
HI,
Its really big information guys about that Income Tax and Rebate for Apartment Owners Association. Its really amazing post.
Thanks
i think that matter is just for good,, and also for the benefits of apartment rentals.
It is a great help for the country and it is ac great privileged to be a part of counties success by paying TAx.
This post from the commonfloor team has really informed its reader a lot regarding the tax reliefs and exemptions especially for Apartment Owners Association. However, there is a need to further elaborate as to how to be able to apply for the PAN and get these benefits. I believe it will greatly help more.
lo
Great Enthusiasm you got there! I have to share to you that you have an eye in making great things as well as inspiring us. The ideas you got are valuable and timely.
Thanks for the post. I was able to refresh by having this informative ideas.
The things discussed here was just helpful. I don’t even know those things, well thanks for informing us..
Hi,
Thanks guys for sharing information about that Income Tax and Rebate for Apartment Owners Association.
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Hi,
This was very useful for our Apartment Association at Hyderabad. We had been debating for a very long about the tax payment.
Please let me know what is the income tax procedure for not registered societies
Your article has established valuable to me. It’s really insightful and you are clearly quite experienced in this area. You have opened my eyes to various views on this matter with intriguing and sound content.
Fantastic points altogether! Thanks much.
Really nice article. The interest earned on a corpus fund, TDS is deducted, I think it is possible to issue Form -15H for non deduction of income tax from interest. provided the overall taxable income is below Rs.1.80 lakhs. can any one clarify it pls.