Our CHS has Repairs Funds and Sinking Funds accumulated of which FD is made.
CHS has charged us share of Income Tax to be paid on that Interest Earned. I wish to know whether the Member is liable to pay? The Interest earned is going to society so the CHS must bear the Income Tax is my opinion. Kindly advise.
In case Experts are view of that each member must bear the burden of Income Tax then as a member may I suggest to CHS to keep the funds in Current Account so no burden of Income Tax for each member.
04 October 2019
What is the policy of the CHS on the subject matter? Generally all the expenses are borne by members, however, if the amount is deposited in Bank/FD and earning interest on the amount, income tax earned on the amount should have been paid from there itself i.e., without further burdening the members. It would be advisable to consult a local prudent lawyer with relevant documents for better appreciation of facts, guidance and proceeding. However, if you are located in Delhi and feel so, may contact me (on appointment) at: Chamber No 647, Lawyer's Chamber Block, Dwarka Courts Complex, Sector 10, Dwarka, New Delhi-110075; Cell# +91 9891152939 or visit: vakil-saab.com
Thank you and you have rightly pointed out. This will have to be clarified with Society because it was just a topic that Society has not paid Income Tax on Interest earned on FDs. It was also mentioned that the past Auditor had failed to notify Society on its obligation to file ITR and Pay Income Tax. It was a very generalized and most ambiguous statement. All said yes it should be paid to avoid any delay and penalty. No mention was made as to who will bear the Income tax that is to be paid to Government Treasury. I will have to speak to them and as suggested has to be resolved by calling SGM. I will have to get copies of all FDs, Interest Earned, TDS deducted if any, the copy of ITR and Income Tax calculations and only after that will have to embark on further representation with Society. Thank you again. The only thought that I have, whether correct or not, If a member has to be part of liability (toward paying/sharing the burden of Income Tax) then what happens to the Assets (Interest earned)? If not discussed and brought to logical conclusions then it will occur each year. Thank you
04 October 2019
1. The Person /Entity earning Income has to pay the applicable Income Tax, out from the Income Earned by it.
2. IF CHS has earned Income THEN CHS pays the Income Tax, under its own PAN no. IF a Indidivual has earned Income THEN the individual pays his Income Tax, under its own PAN no.
3. Income amount minus Income Tax paid amount is equal to Net Income for Society, which has to be capitalized into the CHS Balance Sheet. IF income tas is charged to members, THEN it would mean further taxable income in the CHS balance sheet, causing a vicious cycle and double taxation.
4. It is a absolutely nefarious thing to charge income tax to the individual flat owners, since the individual flat owners have NOT earned income from the Society FDRs. The same policy is applicable to corporates & business entities.
07 October 2019
I agree with the views expressed by Shri Hemant Agarwal. The Society cannot pass on the tax liability to the members. The interest income is earned by the Society and tax has to be paid out of the income earned by it.