Section 149: deduction for income of co-operative societies

Introduction

Section 149 provides category-specific deductions for co-operative societies, including qualifying member-oriented business, certain supplies, limited other activity and specified investment or property income. The Finance Act, 2026 amended parts of this section, so the current clause must be read rather than an old summary.

Key takeaways

The basic rule

Where the gross total income of an assessee, being a co-operative society, includes income of a kind described below, the corresponding sum is allowed as a deduction in computing the society's total income, in accordance with and subject to the rest of this section.

Full deduction for specified core activities

For a co-operative society engaged in any one or more of the following activities, the whole of the profits and gains of business attributable to those activities is deductible:

• Carrying on the business of banking or providing credit facilities to its members
• Cottage industry
• Marketing of agricultural produce grown by its members
• Purchase of agricultural implements, seeds, livestock or other articles intended for agriculture, for supplying them to its members
• Processing, without the aid of power, of the agricultural produce of its members
• Collective disposal of the labour of its members
• Fishing or allied activities - catching, curing, processing, preserving, storing or marketing of fish, or purchasing materials and equipment for that purpose, for supplying to its members

Full deduction for primary societies supplying milk, oilseeds, cotton seed, cattle feed, fruits or vegetables

A primary co-operative society engaged in supplying milk, oilseeds, cotton seed, cattle feed, fruits, or vegetables raised or grown by its members gets a full deduction of the profits from that business, where the supply is made to: a federal co-operative society engaged in the business of supplying those items; or the Government or a local authority; or a Government company or statutory corporation engaged in supplying those items to the public.

Capped deduction for other business activities

For a co-operative society engaged in activities other than those above (whether alone or in addition to them), the amount of profits and gains attributable to those other activities is deductible only up to:

Deduction for interest/dividend income and godown/warehouse rental income

The whole of any income derived by a co-operative society from its investments with any other co-operative society by way of interest or dividends is deductible.

The whole of any income derived by a co-operative society from letting godowns or warehouses for storage, processing, or facilitating the marketing of commodities is deductible.

Deduction for smaller societies' interest-on-securities and house-property income

For a co-operative society that is not a housing society, an urban consumers' society (benefiting consumers within a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment), a society carrying on transport business, or a society doing manufacturing with the aid of power, and whose gross total income does not exceed ₹20,000, the deduction also covers income by way of interest on securities and any income from house property chargeable under section 20.

Restriction on voting rights for labour/fishing societies

For a society engaged in collective disposal of labour, or fishing/allied activities, the deduction under sub-section (1) applies only when the society's rules and bye-laws restrict voting rights to: individuals who contribute their labour or carry on fishing or allied activities; co-operative credit societies that provide financial assistance to the society; and the State Government.

Interaction with Section 138

Where the assessee is also entitled to a deduction under section 138, the Section 149 deduction on the income covered by sub-section (2)(a), (b), (c) or sub-section (3) is worked out after first reducing that Section 138 deduction from the relevant income.

Who Section 149 does not apply to

This section does not apply to any co-operative bank that is not a primary agricultural credit society or a primary co-operative agricultural and rural development bank.

Key definitions

Step-by-step flow for applying Section 149

1. 1

   Is the assessee a co-operative society?

   • No: Section 149 does not apply.
   • Yes: Go to the next step.
2. 2

   Is it a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank?

   Section 149(5) excludes such co-operative banks.

   • Yes: No deduction under Section 149.
   • No: Go to the next step.
3. 3

   Split gross total income into the categories of Section 149(2)

   Clause (a) core activities (whole profits); clause (b) primary societies supplying milk, oilseeds, cotton seed, cattle feed, fruits or vegetables to the listed buyers (whole profits); clause (c) other activities (capped); clause (d) interest or dividends from investments with other co-operative societies (whole); clause (e) letting of godowns or warehouses (whole); clause (f) interest on securities and house property income for small societies.

4. 4

   Does the society undertake collective disposal of labour or fishing and allied activities?

   • Yes: Check that the rules and bye-laws restrict voting rights to the classes listed in Section 149(3) before claiming.
   • No: Go to the next step.
5. 5

   Apply the caps and the Section 138 ordering rule

   Clause (c) is capped at ₹1,00,000 for a consumers' co-operative society and ₹50,000 in any other case. Clause (f) is available only where gross total income does not exceed ₹20,000 and the society is not a housing, urban consumers', transport or power-aided manufacturing society. Where Section 138 also applies, Section 149(4) requires the relevant income to be reduced by that deduction first.

Practical checklist

Glossary

Primary agricultural credit society

The society type defined by the Banking Regulation Act cross-reference in the amended section.

Consumers' co-operative society

A society for the benefit of consumers under the statutory definition.

Frequently asked questions