Filing income tax return for Resident Welfare Association

This is with reference to filing of Income Tax return for our Apartment Association. I have the following Queries :-

a) Which ITR form should be used to file the IT Return Form 5 or Form 7.
b) Whether we need to show all the Contributions as well as expenditure in the IT Return and the claim the excess of Income over expenditure as deduction?. If yes, then where this deduction need to be shown in the ITR Form.
c) In case of a loss, whether we can claim the refund of TDS Deducted by the bank for the Term deposit Amount.
d) What is the rate of Income tax to be applied when the Income Tax is to be paid. Whether it is the Maximum Rate ( We do not have shares determinant in the agreement).
e) Can a sample copy of the ITR for Resident welfare association can be shared for providing further clarifications.
Asked 1 year ago in Income Tax from Bangalore, Karnataka
a) ITR 7, if the association is claiming exemption u/s 11. Otherwise, ITR 5 will be OK.
b) You need to submit the total contributions and expenses as per your Income and Expenditure statement. 
c) If your tax liability is less than the TDS amount, you can claim refund of TDS in excess of your tax liability.
d) The taxes as applicable to individuals and AOPs only will be payable. There is no need for maximum rate as applicable to Private family trusts.
e) I don't have copy of such ITR. However, you can use standard software for filing.
B Vijaya Kumar
CA, Hyderabad
405 Answers
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a)  ITR  form no 7 should be used for filing return of AOP.

b) The surplus derived from maintenance of the apartment complex is exempt income as mutual income, provided the identity of contri butors and benificiaries of maintenance expenses are the same and the income may be reported as income exempt from income tax.

c) In case of loss or income from maintenance activity which is exempt, any interest income or other receipts if any 
may be braught to tax while filing return of Income and any excess TDS over any tax payable may be claimed as refund.

d) This is a welfate association and it is assessed in the status of Association of Persons and basic exemption of Rs 2,50,000 is available for income other than income from maintenance activity any income above Rs 2,50,000 will attract income tax at the rates of 10%, 20% and 30% depending the quantum of Income.

e) You may access return form from the website of Income Tax Department.
Vijay N. Kale
CA, Hyderabad
248 Answers
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A cooperative society requires to file its return of income in ITR-5 within 30th September. 

Just like a Company, without filing a ‘loss return’ within the stipulated time, business loss and loss under the head capital gains of a cooperative cannot be carried forward. Loss under the head income from house property and unabsorbed depreciation also cannot be carried forward if loss return is not filed at all. It has to follow a slab rate for computing tax liability: Income up to Rs. 10,000 – tax @10%, Income from Rs. 10,001 to Rs. 20,000 – tax @20% and Income Rs. 20,001 onwards – tax @30%; The same implies, that if a society has any taxable income, it has to file a return of income. From AY 2014-15, like companies, cooperatives are also requires to pay surtax @ 10% when the profit exceeds Rs.1 Crore. 

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.
Shyam Sunder Modani
CA, Hyderabad
1131 Answers
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a) Apartment Owners Associations are categorised as Associations of Persons (AOP) under the Income Tax Law. Hence ITR 5 is required to be filed for that.

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

# If a RWA has interest income from savings or FD from amount invested in a nationalised bank can it give from 15G for non deduction of TDS if it declares that it’s income is not taxable.

# If TDS has already been deducted, then It can be claimed back while filing ITR.
Shiv Kumar Agarwal
CA, Delhi
197 Answers
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