Section 204 — New Mfg Co-op Society 15pc | ITA 2025

Section 204 — - NEW MANUFACTURING CO-OPERATIVE SOCIETY 15% REGIME

Section 204 is the substantive equivalent of 1961 s. 115BAE -- the FA 2023 EXTENSION of s. 201-style 15% manufacturing concession to NEW CO-OPERATIVE SOCIETIES. Eligible: resident co-operative society SET UP AND REGISTERED ON OR AFTER 1-APR-2023 AND COMMENCING MANUFACTURE OR PRODUCTION on or before 31-MAR-2024 (sunset; FA 2024 / FA 2025 may have extended). Rate: 15% on profits attributable to manufacturing or specified electricity business. Conditions per s. 205 negative list (similar to s. 201). Mutual exclusion with s. 203 (22%). FA 2023 expansion driven by Budget speech goal of incentivising co-op manufacturing in DAIRY / SUGAR / FERTILISER / FOOD-PROCESSING sectors -- giving rural-cooperative sector parity with corporate sector (which had similar 15% under s. 201 since FA 2019).

Statutory text — Income-tax Act, 2025

Marginal note -- Tax on income of new manufacturing resident co-operative societies

(1) Irrespective of anything contained in this Act but subject to the provisions of Part A, B, E and this Part (other than section 203) of this Chapter, the in- come-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 B

(a) 15% on the total income other than Such co-operative society— the income mentioned in clauses (a) exercises the option in the manner (b), (c) and (d); provided in sub-section (2);

(b) 22% (without any deduction or (b) has been set-up and registered on allowance in respect of any ex- or after the 1st April, 2023; penditure or allowance) on such (c) has commenced manufacturing income,— or production of an article or thing

(i) which has neither been de- on or before the 31st March, 2024; rived from nor is incidental to (d) the total income of which is com- manufacturing or production puted as per the provisions of of an article or thing; and sub-section (3); and

26. Inserted by the Finance Act, 2026, w.e.f. 1-4-2026. Total income and rate of tax Conditions A B

(ii) in respect of which no specific (e) fulfils all the conditions provided rate of tax has been provided in section 205(2). 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).

(2) The option under this section shall be exercised by the assessee in the manner as may be prescribed subject to the following conditions:—

(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

(b) such option, once exercised, shall apply to subsequent tax years;

(c) once the option has been exercised for any tax year, it shall not be sub- sequently withdrawn for the same or any other tax year;

(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 such 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.

(3) For the purposes of sub-section (1), the total income of the assessee shall be computed,—

(a) without any deduction under—

(i) Chapter VIII other than the provisions of section 146 27[ or 150]; or

(ii) sections specified in section 205(1)(a) to (g)32;

(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).

(4) While computing the income of the assessee, the loss and depreciation, or both, as specified in sub-section (3)(b) 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. [(5) In case of an assessee, being a co-operative society, which has exercised option 27 under sub-section (2), the requirements contained in sub-section (3) shall be modified

27. Inserted by the Finance Act, 2026, w.e.f. 1-4-2026. to the extent that the deduction under section 149(2)(d)(ii)shall be available to such assessee as does not exceed the amount of dividend distributed by it to its members at least one month before the due date for filing the return of income under section 263(1).] Conditions for tax on income of certain companies and co-operative societies.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 -- s. 204	INCOME-TAX ACT, 1961 -- s. 115BAE
Sub-s. (1) -- 15% rate for new manufacturing resident co-op	1961 s. 115BAE(1) [FA 2023]
Set up and registered on / after 1-Apr-2023	1961 s. 115BAE(2)(a)
Manufacturing-commencement by 31-Mar-2024 (sunset)	1961 s. 115BAE(2) Proviso
Conditions per s. 205 negative list	1961 s. 115BAE(2) read with conditions
20% old-plant tolerance	1961 s. 115BAE(2)(b) Proviso
Mutual exclusion with s. 203 (22%)	1961 s. 115BAE(7)
Form 10-IFA option exercise / irrevocable	1961 s. 115BAE Rule

STATUTORY ARCHITECTURE -- ELIGIBILITY

THREE-PART ELIGIBILITY: (I) RESIDENT CO-OPERATIVE SOCIETY -- registered under State Co-operative Societies Act / Multi-State Co-operative Societies Act 2002; primary or federated co-op; resident in India. (II) SETUP / REGISTRATION ON OR AFTER 1-APR-2023 -- the watershed cut-off. Pre-1-Apr-2023 setup: NOT eligible (use s. 203 22% instead). (III) MANUFACTURING-COMMENCEMENT ON OR BEFORE 31-MAR-2024 -- the sunset. FA 2024 / FA 2025 may have extended; verify CBDT notification. Manufacturing-commencement = first commercial production / dispatch / sale (not test-runs). ELIGIBLE BUSINESS: (a) Manufacture or production of any article or thing; OR (b) Specified business of GENERATION OF ELECTRICITY (CG-notified). TYPICAL CO-OP SECTORS QUALIFYING: (i) DAIRY co-ops processing milk into pasteurised products / butter / ghee / cheese (Amul-cooperative-network format); (ii) SUGAR co-ops manufacturing sugar / molasses / ethanol; (iii) FERTILISER co-ops (KRIBHCO / IFFCO model); (iv) FOOD-PROCESSING co-ops (oilseed / fruit / vegetable processing); (v) HANDLOOM / TEXTILE co-ops manufacturing yarn / fabric. EXCLUDED ACTIVITIES (s. 205(2)(a)): software / IT services / mining / book publishing / printing / marble cutting / etc.

OPERATIONAL CONDITIONS (s. 205)

(MIRROR of s. 201 / s. 115BAB framework): PLANT AND MACHINERY: (a) NOT PREVIOUSLY USED (other than 20% TOLERANCE); (b) Imported P&M may be old subject to 20% test. BUILDING: NOT previously used as hotel / convention centre. BUSINESS SCOPE: only manufacturing (limited carve-outs); no splitting / reconstruction; no transfer from existing entity (anti-shifting). TRANSFER PRICING: AE-transactions at arm's length per ss. 161-166 (TP regime). For co-ops, 'AE' includes parent / subsidiary / federal / member co-ops -- careful structuring required. CONSEQUENCE OF FAILURE: option becomes invalid; falls back to default regime + applicable MAT. May then opt for s. 203 (22%) cure pathway under s. 203(7).

RATE STRUCTURE

RATE: 15% on profits attributable to manufacturing OR specified electricity business. PLUS surcharge: 10% (capped); PLUS health & education cess: 4%. EFFECTIVE RATE: ~17.16%. Compared to default co-op 30% (effective ~32-35% post-deductions) -- a 15-18 percentage-point saving annually -- substantial incentive. MAT NON-APPLICABILITY: s. 206 MAT (1961 s. 115JC for co-ops) does NOT apply. Trade-off: forfeit accumulated AMT credit (rarely material for new entities).

PRACTICAL APPLICATION AND PIPELINE

FA 2023 was followed by significant policy push: (i) Government's 'Sahakar se Samriddhi' (Prosperity through Co-operation) initiative; (ii) Multi-State Co-operative Societies Act 2002 amendments to facilitate cross-state co-op operations; (iii) Ministry of Co-operation establishment 2021 for co-op sector promotion; (iv) PACS / PCARDB digitisation for credit-co-op sector. S. 204 specifically targets PRODUCTIVE / MANUFACTURING co-ops -- complementary to financing-co-op promotion under s. 149 (which preserves 80P-equivalent deductions). PRACTITIONER: pipeline scarce due to 31-Mar-2024 sunset; verify FA 2024 / 2025 extension; for new co-op manufacturing-setup post-sunset, default regime + s. 149-sectoral-deductions instead.

PLANNING NOTES (EIGHT AREAS)

(i) SUNSET TIMELINE -- 31-Mar-2024 manufacturing-commencement; verify FA 2024/2025 extensions. (ii) FORM 10-IFA -- option-exercise before s. 263 due date for first year; irrevocable. (iii) SETUP-AND-REGISTRATION DATING -- both must be on/after 1-Apr-2023; document state co-op registration. (iv) NEGATIVE-LIST DUE DILIGENCE -- review business activities; non-manufacturing sectors ineligible. (v) 20% OLD-PLANT TEST -- maximum 20% of total P&M may be used / second-hand. (vi) NO BUSINESS-SPLITTING -- new co-op must NOT be reconstruction of existing co-op; restructuring of existing dairy / sugar co-ops separately scrutinised. (vii) AE TRANSACTIONS -- TP scrutiny under ss. 161-166; arms-length pricing for member-cooperative supplies / federal-co-op transactions. (viii) S. 149 INTERACTION -- s. 149 (co-op deduction) and s. 204 (15% rate) MUTUALLY EXCLUSIVE typically; choose more beneficial; for service-co-ops with significant 80P-equivalent deductions, s. 149 + default rate often beats s. 204; for fresh manufacturing-co-ops with NO 80P-eligible income, s. 204 15% wins.

CROSS-REFERENCES

Section 149 -- Co-op society deduction (alternative path; mutually exclusive).
Section 150 -- Federal co-op deduction.
Section 201 -- New manufacturing domestic co. 15% (parallel).
Section 203 -- Co-op 22% concessional (alternative; cure pathway).
Section 205 -- Specified deductions / negative list.
Section 206 -- MAT (NOT applicable for s. 204).
Sections 161-166 -- TP regime (AE-transactions arms length).
Section 263 -- Option-exercise window.
Form 10-IFA -- option-exercise form.
Multi-State Co-operative Societies Act 2002.
State Co-operative Societies Acts.
Ministry of Co-operation circulars.

← All sections (537)Act 2025 hub