Section 149 · Deductions
Section 149 of the Income-tax Act, 2025 — Deduction for Income of Co-operative Societies (old Section 80P)
By CA Rajat Agrawal
Updated 04 Jul 2026
Chapter VIII
📜 What the law says — Section 149, Income-tax Act 2025
149. (1) If the gross total income of an assessee, being a co-operative society,
includes any income referred to in sub-section (2), the sums specified in
the said sub-section shall, in accordance with and subject to the provisions of this
section, be allowed as deduction in computing the total income of such assessee.
(2) The sums referred to in sub-section (1) shall be the following:—
(a) in the case of a co-operative society engaged in—
(i) carrying on the business of banking or providing credit facilities
to its members; or
(ii) a cottage industry; or
(iii) the marketing of agricultural produce grown by its members; or
(iv) the purchase of agricultural implements, seeds, livestock or other
articles intended for agriculture for the purpose of supplying them
to its members; or
(v) the processing, without the aid of power, of the agricultural produce
of its members; or
(vi) the collective disposal of the labour of its members; or
(vii) fishing or allied activities, that is to say, the catching, curing, pro-
cessing, preserving, storing or marketing of fish or the purchase of
materials and equipment in connection therewith for the purpose
of supplying them to its members,
the whole of the amount of profits and gains of business attributable to
any one or more of such activities;
(b) in the case of a co-operative society, being a primary society engaged in
supplying milk, oilseeds, 15[cotton seed, cattle feed,] fruits, or vegetables
raised or grown by its members to—
(i) a federal co-operative society, being a society, engaged in the busi-
ness of supplying milk, oilseeds, 15[cotton seed, cattle feed,] fruits
or vegetables; or
(ii) the Government or a local authority; or
(iii) a Government company, as defined in section 2(45) of the
Companies Act, 2013 (18 of 2013), or a corporation established by
or under a Central Act or State Act or Provincial Act, engaged in
supplying milk, oilseeds, 15[cotton seed, cattle feed,] fruits or vege-
tables, as the case may be, to the public,
the whole of the amount of profits and gains of su
In plain language
What Section 149 is about
Section 149 of the Income-tax Act, 2025 (effective 1 April 2026, applying from Tax Year 2026-27) is the re-drafted, plain-language version of the old Section 80P of the Income-tax Act, 1961. It gives co-operative societies a deduction from their gross total income for profits earned from specified co-operative activities. The idea is unchanged: reward genuine self-help co-operatives — agricultural credit societies, marketing societies, dairy and fishery co-ops, cottage-industry co-ops, consumer stores — by letting them keep more of their earnings so the benefit flows back to members.
Who can claim it
- Only a "co-operative society" registered under a Co-operative Societies Act (Central or State) can claim. Companies, firms and individuals cannot use this section.
- Co-operative banks are largely shut out. A co-operative bank cannot claim under Section 149 except where it is a Primary Agricultural Credit Society (PACS) or a Primary Co-operative Agricultural and Rural Development Bank (PCARDB). This mirrors the old Section 80P(4) inserted by the Finance Act, 2006.
The activities that get a 100% deduction
Where the whole profit of the activity is deductible (no cap), the eligible activities are:
- Banking or providing credit facilities to members (the classic credit co-operative).
- Cottage industry run by the society.
- Marketing agricultural produce grown by its members.
- Purchase of agricultural implements, seeds, livestock or other articles for supplying to members.
- Processing of members' agricultural produce without the aid of power.
- Collective disposal of the labour of its members.
- Fishing or allied activities — catching, curing, processing, preserving, storing or marketing fish, and supply of related equipment.
For the collective labour and fishing categories, an extra condition applies: voting rights must be restricted to member individuals contributing labour/fish, co-operative credit societies financing the society, and the State Government.
Primary milk, oilseed, fruit and vegetable societies
A primary society that supplies milk, oilseeds, fruits or vegetables grown/raised by its members to a federal co-operative society, the Government, a local authority or a Government company gets the whole profit deducted.
The capped ("residual") deduction — ₹1,00,000 / ₹50,000
If a society earns profit from activities not in the 100% list above, it still gets a limited deduction:
- ₹1,00,000 for a consumers' co-operative society.
- ₹50,000 for any other society.
Other fully-deductible income streams
- Interest or dividend a society earns from its investments in any other co-operative society (the old 80P(2)(d)) — fully deductible.
- Income from letting godowns or warehouses for storage, processing or facilitating the marketing of commodities — fully deductible.
- For small societies (gross total income up to ₹20,000), interest on securities and income from house property are also deductible — but this does not apply to housing societies, urban consumers' societies, transport businesses or societies manufacturing with power.
How it interacts with other provisions
- The deduction is taken from gross total income, and is available only if that income actually includes the eligible co-operative income.
- It works alongside — and after — other profit-linked deductions, so the same rupee of profit is not deducted twice.
- Section 149 does not exempt a society from filing an income-tax return or from the requirement to claim the deduction in the return by the due date. Late or non-filing can cost the deduction.
Practical implications
The substance is identical to old Section 80P — the CBDT has simply renumbered and cleaned up the language under the 2025 Act. Societies should keep activity-wise books so profit from each eligible activity is clearly identifiable, since the deduction is computed activity by activity. The two contested areas from the old regime continue: (1) whether a credit society is really a "co-operative bank" (and therefore excluded), and (2) whether interest on surplus funds parked in a bank (as opposed to another co-operative society) qualifies — courts have generally held such bank interest is not covered under the interest-from-co-operative-society limb.
💡 Example
Example 1 — A rural credit co-operative (PACS). Suppose Jaipur Grameen Sahakari Credit Society (a Primary Agricultural Credit Society) earns ₹18,00,000 profit from providing credit to its members and another ₹1,20,000 as interest on money it invested in the district co-operative marketing society. The credit-to-members profit (₹18,00,000) is fully deductible under the banking/credit limb, and the ₹1,20,000 interest from another co-operative society is fully deductible too. Deduction = ₹19,20,000; taxable income from these streams = nil.
Example 2 — A consumers' co-operative store with mixed income. Shakti Consumers' Co-operative runs a members' store and also earns ₹90,000 from a small catering side-activity that is not on the 100% list. As a consumers' society, its residual deduction is capped at ₹1,00,000. Since ₹90,000 is below the cap, the full ₹90,000 is deductible. Had the catering profit been ₹1,40,000, only ₹1,00,000 would be deductible and ₹40,000 would remain taxable.
A short story. Meena runs the accounts for a small dairy co-operative in a village near Ajmer. Every morning members bring milk that the society sells to the State milk federation. When she files the return, she worries the ₹22 lakh profit will be taxed away. Her CA explains Section 149(2)(b): because it is a primary society supplying members' milk to a federal co-operative, the whole profit is deductible. Relieved, she also learns that the ₹80,000 the society earned as interest from parking money in the local co-operative bank's society shares is fully deductible — but the interest from a nationalised bank FD is not. She reorganises the surplus accordingly.
| Income / Activity of the co-operative society | Deduction under Section 149 | Cap |
|---|
| Banking / credit facilities to members | Whole profit | No cap |
| Cottage industry | Whole profit | No cap |
| Marketing agricultural produce grown by members | Whole profit | No cap |
| Supply of implements/seeds/livestock to members | Whole profit | No cap |
| Processing members' produce without power | Whole profit | No cap |
| Collective disposal of members' labour* | Whole profit | No cap |
| Fishing / allied activities* | Whole profit | No cap |
| Primary society supplying milk/oilseeds/fruits/vegetables to federal society/Govt | Whole profit | No cap |
| Interest / dividend from investment in another co-operative society | Whole income | No cap |
| Letting of godowns/warehouses for storage/processing/marketing | Whole income | No cap |
| Consumers' co-operative society — other (residual) activities | Profit up to limit | ₹1,00,000 |
| Any other society — other (residual) activities | Profit up to limit | ₹50,000 |
| Small society (GTI up to ₹20,000): interest on securities + house property | Whole such income | GTI ≤ ₹20,000 |
| Co-operative bank (not being a PACS or PCARDB) | Not eligible | Excluded |
*Voting rights must be restricted to labour/fish-contributing members, financing co-operative credit societies and the State Government.
Related sections
Section 148 — Deduction for royalty income of authors (old 80QQB) Section 80P (1961 Act) — Original co-operative society deduction Section 2(21) — Meaning of co-operative society Section 144 — Deductions for profits of specified undertakings Section 111 — Aggregation and limits on Chapter VIII-A deductions Section 138 — Reduction of other deductions before this section
Frequently asked questions
Is Section 149 of the 2025 Act the same as Section 80P?
Yes. Section 149 of the Income-tax Act, 2025 is the renumbered and simplified version of Section 80P of the 1961 Act. The eligible activities, the ₹1,00,000/₹50,000 caps and the co-operative bank exclusion are carried forward substantially unchanged.
Can a co-operative bank claim the deduction under Section 149?
Generally no. A co-operative bank is excluded, except where it is a Primary Agricultural Credit Society (PACS) or a Primary Co-operative Agricultural and Rural Development Bank (PCARDB), which remain eligible.
How much is the deduction for a consumers' co-operative society on other income?
For activities not covered by the 100% limbs, a consumers' co-operative society can deduct up to ₹1,00,000, while any other society can deduct up to ₹50,000.
Is interest on a fixed deposit with a nationalised bank deductible?
The full deduction for interest/dividend applies only to investments in another co-operative society. Courts have generally held that interest earned from deposits with commercial or nationalised banks does not qualify under this limb.
Do I still have to file a return to get the Section 149 deduction?
Yes. The deduction is not automatic — the society must file its income-tax return and claim the deduction, ideally by the due date, to avoid losing the benefit.
Does a housing co-operative society qualify under Section 149?
A housing society does not get the special small-society (GTI up to ₹20,000) benefit for interest on securities and house property income, as it is specifically excluded from that limb. It may still qualify for other applicable limbs if its activities fit.
From when does Section 149 apply?
The Income-tax Act, 2025 takes effect from 1 April 2026, so Section 149 applies from Tax Year 2026-27 onwards, replacing Section 80P of the 1961 Act.
C
CA Rajat Agrawal
Chartered Accountant, EaseValue · Reviewed 04 Jul 2026
This explainer is prepared and reviewed by EaseValue's tax team, based on the text of the Income-tax Act, 2025 (as amended by the Finance Act, 2026).
Disclaimer: This page explains the law in general terms for education and is not professional advice. The Income-tax Act, 2025 takes effect from 1 April 2026; provisions, thresholds and interpretations may change. Please confirm your specific position with our team before acting.
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