Section 204
Section 204: concessional 15% rate for new manufacturing co-operative societies
Section 204 mirrors Section 201's concessional treatment for new manufacturing companies, but for resident co-operative societies newly set up for manufacturing, registered on or after 1 April 2023, that commenced production on or before 31 March 2024.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
The rates that apply
At the society's option, its total income is taxed at the following rates instead of the normal computation:
| Income | Rate |
|---|---|
| Total income other than the categories below | 15% |
| Income that has neither been derived from nor is incidental to manufacturing or production, and for which no specific rate is otherwise provided under this Part (computed without any deduction for related expenditure or allowance) | 22% |
| Short-term capital gains from transfer of a capital asset on which no depreciation is allowable under the Act | 22% |
| Income deemed so under section 205(4) (arm's-length adjustment for related-party transactions) | 30% |
Conditions to use this section
The society must:
- Exercise the option as described below;
- Have been set up and registered on or after 1 April 2023;
- Have commenced manufacturing or production of an article or thing on or before 31 March 2024;
- Compute its total income as described in sub-section (3); and
- Fulfil the conditions in section 205(2) (which restricts using previously-used plant/machinery, and confines the business to manufacturing).
Exercising the option, and what happens on default
The option must be exercised on or before the due date under section 263(1) for furnishing the first of the returns of income for any tax year; once exercised, it applies to subsequent tax years and cannot be withdrawn for that or any other year.
If the society fails to fulfil the sub-section (1) conditions in any tax year, the option becomes invalid for that year and all subsequent years, and the rest of the Act applies as if the option had never been exercised for those years.
How total income is computed, and dividend distribution
For the purposes of sub-section (1), total income is computed without deduction under Chapter VIII (other than section 146, or section 150) and without deduction under the sections listed in section 205(1)(a) to (g); and without set-off of any loss or depreciation carried forward that is attributable to those disallowed deductions.
A loss or depreciation that cannot be set off for this reason is deemed to have been given full effect to, so no further deduction is allowed for it in a later year.
For a society that has exercised the option under sub-section (2), this requirement is further modified so that the deduction under section 149(2)(d)(ii) remains available up to the amount of dividend distributed to members at least one month before the return filing due date under section 263(1).
Frequently asked questions
Which co-operative societies qualify for the 15% rate under Section 204?
A resident co-operative society engaged in manufacturing or production, set up and registered on or after 1 April 2023, that commenced manufacturing or production on or before 31 March 2024, and that meets the section 205(2) conditions.
What rate applies to non-manufacturing income of such a society?
22% on income not derived from or incidental to manufacturing (with no deductions for related expenditure), and 22% on short-term capital gains from an asset with no allowable depreciation.
Related sections
Want this applied to your actual filing, not just explained?
Check if the Section 204 new-manufacturing rate suits your societyLast updated 9 September 2026