Legal Compliance Framework for a Cooperative Housing Society

Many a times we have seen that Managing committee fails in legal compliance not because of time but just due to less awareness or callouness on the various compliance required by law.

The recent changes (yet to receive consent from Governor of Maharashtra) in Maharashtra Cooperative Society Act, proposed a Fine of 25000/- (Rupees Twenty-Five Thousand) in case Managing Committee fails to comply with the legal & mandatory requirements.

We at Sahakarsutra therefore thought to share various legal compliances which the Managing Committee needs to comply without any exception.

A. Society Statutory Registers

As per the various provision of the Society Bye-laws / Maharashtra Cooperative Societies Rules, the Society needs to keep the following statutory register;

1. I Register
2. J Register
3. Property Register
4. Share Register
5. Nomination Register
6. Sinking Fund Register
7. Associate Membership Register
8. Mortgage / Loan Register
9. Managing Committee Meeting Minutes Book
10. General Body Meeting Minutes Book
11. Tenant Register
12. Vehicle register
13. Inventory / Asset Register
14. Investment Register

B. Maintenance of Accounts Register

In order to maintain effective and transparent account system, the society should keep the below mentioned books of accounts as per bye law.

1. Bank Register
2. Cash Register
3. Journal Register
4. Income and Expenses Report
5. Receipts & Payment Report
6. Balance Sheet
7. Investment Register
8. Fixed Asset Register

C. Audit

As per the Maharashtra Cooperative Society Act, it is mandatory that society should get its annual accounts audited from panel of approved auditors by the State Government. You may check the approved List of Panel Auditors having required qualification and experience.

The society need to follow the below deadline in order to have a compliant Housing Society.

1. Finalization of Accounts: 15th May
2. Accounts to be handed over for Audit: 1st June
3. Audit Completion: 31st July
4. Audit Report Upload: 31st Aug
5. AGM Date: 30th Sept
6. Mandatory Annual Return by Society: 30th Sept
7. Mandatory Return by Society about Auditor Appointment: One month from AGM or 31st Oct
8. Online Audit Order Generation by Auditor: 31st Oct
9. Audit Rectification Report by Society: 3 months from the date of submission of report by Auditor
10. Rectification Report Upload by Auditor through Audit login: Once received from Society
11. Auditor will verify registers maintained by society hence committee members should maintain registers mentioned above.

D. Income Tax

There is a perception that housing societies are not apparently engaged in any income earning activities, there is a perception that they are not required to comply with any income tax provisions. Section 2 (31) of the Income Tax Actdefines the entities that are treated as persons, for the purpose of income tax. A person is the basic entity under the income tax laws, which has to comply with various income tax provisions, including filing of return, payment of taxes, deduction of tax at source, etc. The definition includes “an association of persons(AOP) or body of individuals, whether incorporated or not”. 

As per Section 139 of Income Tax Act, person whose total income exceeds the limit are required to file income tax return mandatory. In case of society, income tax slab is started from Rs.1 to 10000. In other words, if society earn Rs.1 taxable income also then it is mandatory for them to comply with income tax procedure.

30th Sept of the year following the financial year is the date, Society Managing Committee should remember as they are required to file their Income Tax Return (ITR), as the accounts of the housing society are required to be audited under the provisions of their respective cooperative society laws. If the housing society fails to file its ITR by the due date, it has to pay interest on the outstanding tax liability in case the liability is not already discharged by way of TDS or by payment of advance tax, for the period of delay, in addition to interest liability on the shortfall in payment of balance tax after adjusting TDS and advance tax.

In case the housing society fails to file its ITR by the due date, it can still file the same by March 31 of the year next to the period for which the ITR belongs. For the delay, the society has to pay a mandatory fee of Rs 5,000 if the delay is up to December, but the fee will be Rs 10,000 if the delay goes beyond December of the next year. The mandatory fee for delay in filing of the return shall be restricted to Rs 1,000, in case the taxable amount of the housing society does not exceed Rs five lakhs.

The society needs to pay advance tax, in case its advance tax liability exceeds Rs 10,000 for a year in four instalments on June 15, September 15, December 15 and March 15, in the ratio of 15 per cent, 30 per cent, 30 per cent and 25 per cent of the aggregate advance tax liability.

This is for your information.