Tax on income of certain new manufacturing co-operative societies
[Section-204 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
Section 204(1) of Income Tax Act 2025
204(1) Irrespective of anything contained in this Act but subject to the provisions of Part A, B and this Part other than section 203, the income-tax payable in respect of the total income of an assessee, being a co-operative society, resident in India, engaged in the business of manufacture or production of any article or thing, shall at the option of such assessee, be computed at the rates specified in column A of the said Table, if the conditions contained in column B thereof are fulfilled.
Table
| Total income and rate of tax | Conditions |
|---|---|
| (a) 15% on the total income other than the income mentioned in clauses (b), (c) and (d); (b) 22% (without any deduction or allowance in respect of any expenditure or allowance) on such income,— (i) which has neither been derived from nor is incidental to manufacturing or production of an article or thing; and (ii) in respect of which no specific rate of tax has been provided separately under this Part; (c) 22% on short-term capital gains derived from transfer of a capital asset on which no depreciation is allowable under this Act; (d) 30% on the income deemed so under section 205 (4). | Such co-operative society–– (a) exercises the option in the manner provided in sub-section (2); (b) has been set-up and registered on or after the 1st April, 2023; and (c) has commenced manufacturing or production of an article or thing on or before the 31st March, 2024; and (d) the total income of which is computed as per the provisions of sub-section (3); and (e) fulfils all the conditions provided in section 205(2). |
Section 204(2) of Income Tax Act 2025
204(2) The option under this section shall be exercised by the assessee in the manner as prescribed subject to the following conditions:––
- 204(2)(a) it shall be exercised on or before the due date specified under section 263(1) for furnishing the first of the returns of income for any tax year; and
- 204(2)(b) such option, once exercised, shall apply to subsequent tax years;
- 204(2)(c) once the option has been exercised for any tax year, it shall not be subsequently withdrawn for the same or any other tax year;
- 204(2)(d) where the assessee fails to fulfil the conditions contained in sub-section (1)(Table: Sl. No. 1. B) in any tax year,––
- (i) the option shall become invalid in respect of the tax year and subsequent tax years; and
- (ii) the other provisions of this Act shall apply, as if the option had not been exercised for that tax year and subsequent tax years.
Section 204(3) of Income Tax Act 2025
204(3) For the purposes of sub-section (1), the total income of the assessee shall be computed,—
- 204(3)(a) without any deduction under––
- (i) Chapter VIII other than the provisions of section 146; or
- (ii) sections specified in 205(1)(a) to (g);
- 204(3)(b) without set off of any loss carried forward or depreciation from earlier tax year, if such loss or depreciation is attributable to any of the deductions referred to in clause (a).
Section 204(4) of Income Tax Act 2025
204(4) While computing the income of the assessee, the loss and depreciation, or both, as specified in sub-section (3)(b) be shall be deemed to have been given full effect to and no further deduction for such loss or depreciation, or both, shall be allowed for any subsequent year.
FAQs on Section 204 of Income Tax Act 2025
What is Section 204 of the Income Tax Act, 2025 about?
It provides an optional concessional tax regime for certain new manufacturing co-operative societies in India.
Who is eligible to opt for this concessional regime?
A resident co-operative society set up and registered on or after April 1, 2023, which commenced manufacturing or production on or before March 31, 2024.
What is the concessional tax rate on income from manufacturing or production?
15% on total income other than income referred to in clauses (b), (c), and (d) of the Table in Section 204(1).
What is the tax rate on income not derived from or incidental to manufacturing?
22%, without allowing any deduction or allowance in respect of any expenditure or allowance.
What is the tax rate on certain short-term capital gains?
22% on short-term capital gains from transfer of capital assets on which no depreciation is allowable.
What is the tax rate on deemed income under Section 205(4)?
30%.
How must the option be exercised under Section 204?
It must be exercised in the prescribed manner on or before the due date under Section 263(1) for furnishing the first return of income.
Can this option be withdrawn once exercised?
No, once exercised, the option cannot be withdrawn for the same or any other tax year.
What happens if conditions are violated in a later year?
The option becomes invalid for that and all future years. Normal tax provisions will apply as if the option was never exercised.
How is total income computed under this section?
Without any deduction under Chapter VIII (except Section 146) or Sections 205(1)(a) to (g), and without set-off of any related carried forward loss or depreciation.
Can such disallowed loss or depreciation be claimed in future years?
No, it is deemed to have been fully allowed and cannot be claimed in any future year.
Is the concessional regime automatic for eligible societies?
No, it must be opted for explicitly in the prescribed manner and timeline.
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