Income Tax Act 2025: Section 203 for Tax Year 2026-27

Tax on income of certain resident co-operative societies

[Section-203 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]

Section 203(1) of Income Tax Act 2025

203(1) Irrespective of anything contained in this Act but subject to the provisions of Part A, B and this Part, other than section 204, the income-tax payable for a tax year shall be at the rate of 22%, at the option of a person being a co-operative society resident in India, in respect of the total income of such person computed in the following manner:––

• 203(1)(a) without any deduction under—
  • (i) Chapter VIII other than the provisions of section 146; or
  • (ii) sections specified in section 205(1)(a) to (g);
• 203(1)(b) without set off of any loss carried forward or depreciation from any earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a).

Section 203(2) of Income Tax Act 2025

203(2) Where a person fails to satisfy the requirements contained in sub-section (1) in any tax year, the option shall become invalid in respect of the said tax year and subsequent tax years and other provisions of the Act shall apply, as if the option had not been exercised for such tax year and for subsequent tax years.

Section 203(3) of Income Tax Act 2025

203(3) The loss and depreciation referred to in clause (b) of sub-section (1) shall be deemed to have been given full effect to and no further deduction for such loss or depreciation shall be allowed for any subsequent tax year.

Section 203(4) of Income Tax Act 2025

203(4) In case of a person, having a Unit in the International Financial Services Centre, which has exercised option under this section, the requirements contained in sub-section (1) shall be modified to the extent that the deduction under section 147 shall be available to such Unit subject to fulfilment of the conditions contained in the said section.

Section 203(5) of Income Tax Act 2025

203(5) The provisions of this section shall not apply unless the option is exercised by the person in the prescribed manner on or before the due date specified under section 263(1) for furnishing the return of income and such option once exercised shall apply to subsequent tax years.

Section 203(6) of Income Tax Act 2025

203(6) Once the option under this section has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year.

FAQs on Section 203 of Income Tax Act 2025

What is the tax rate under Section 203 for resident co-operative societies?
The tax rate is 22% on total income, provided the co-operative society opts for it and fulfills specified conditions.

Who can opt for the 22% concessional tax rate under Section 203?
Only co-operative societies that are residents in India can opt for the 22% tax rate under Section 203.

What are the conditions to be fulfilled under Section 203(1) to avail the 22% rate?
The total income must be computed without claiming deductions under Chapter VIII (except section 146), and sections mentioned in section 205(1)(a) to (g), and without set-off of carried forward losses or depreciation related to those deductions.

Can a co-operative society claim carried forward losses under the 22% regime?
No, carried forward losses or depreciation attributable to the disallowed deductions cannot be set off under the 22% regime.

What happens if the conditions in Section 203(1) are not met in any tax year?
If the conditions are not satisfied in any tax year, the option becomes invalid for that year and all subsequent years, and the normal provisions of the Act will apply.

Is there any impact on the carried forward loss or depreciation after opting for Section 203?
Yes, such losses and depreciation are deemed to have been fully utilized and cannot be claimed in any subsequent year.

Can a co-operative society with a unit in an International Financial Services Centre claim any deductions?
Yes, if it opts for Section 203, it can still claim deduction under section 147 for such unit, subject to conditions of that section.

How and when should the option for Section 203 be exercised?
The option must be exercised in the prescribed manner on or before the due date for filing the return under section 263(1).

Is it possible to withdraw the option once exercised under Section 203?
No, once the option is exercised, it cannot be withdrawn for the same or any subsequent tax year.