On February 1st, 2022, the Finance Minister delivered the Union Budget 2022. There were no adjustments to the tax slab rates for individual taxpayers, but the budget speech introduced new tax laws for cooperative societies. Let’s understand the latest update for Reduction in MAT for cooperative societies.
What is a Cooperative Society?
Members of a Cooperative Society are mostly employees and small-scale producers. Together, using democratic principles and cooperative management, they work to better their living and working conditions, as well as their financial situation.
What is MAT?
The MAT stands for Minimum Alternate Tax. In order to lessen the discrepancy between tax liability based on income and book profits, the MAT (or Minimum Alternate Tax) was implemented.
In other words, The concept of MAT was developed to target firms that earn high profits and distribute them to shareholders while paying nil or little tax under the standard terms of the Income Tax Act, by utilizing the Act’s many deductions and exclusions.
However, with the implementation of MAT, businesses are required to pay a specified proportion of their earnings as Minimum Alternate Tax.
Furthermore, MAT is applicable to all businesses, including foreign-based enterprises. MAT is determined in accordance with Section 115JB of the Income Tax Act and you might need a consultation with an expert to determine your tax liability.
Important Note: You can also claim MAT Credit for the taxes paid in accordance with the provisions of section 115JAA.
Eligibility Criteria for Cooperative Society Registration
- You must be a citizen of India or a legal resident of the country, and you must be at least 16 years of age.
- Must not be of unsound mind and an undischarged bankrupt.
MAT Reduced for Cooperative Societies to 15%
Finance Minister Nirmala Sitharaman said on February 1 that the government intends to lower the minimum alternative tax (MAT) for cooperative societies from its existing rate of 18.5% to 15%, in line with the tax rates for private corporations.
According to her Union Budget Speech in Parliament, she stated that the government plans to lower the surcharge on cooperative societies from the current 12 percent to 7% for those with a total income of more than 1 crore up to 10 crores.
Finance Minister on Reduction in MAT for cooperative Societies
“To level the playing field between cooperative societies and corporations, I suggest lowering this rate (MAT) for cooperative societies to 15%,” the Finance Minister said while presenting Union Budget 2022 Highlights.
As of right now, cooperative societies are obliged to pay 18.5% of their profits in MAT, while corporations pay 15%.
Besides reducing the cooperative society surcharge from the current 12 percent to 7 percent, she added the reductions are for people with overall revenue of more than 1 crore to up to 10 crore rupees.
“This would aid in improving the revenue of cooperative societies and its participants who are largely from the rural and from farming communities,” she added.
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