What is Section 80P(2)(d) of Income Tax Act? — A Simple Guide for Cooperative Societies

When it comes to taxation, cooperative societies often get confused about which incomes are exempt. One important benefit many miss is the deduction under Section 80P(2)(d) of the Income Tax Act. This provision allows certain income to be tax-free — but only under specific conditions. Let’s break it down in simple terms.

What is Section 80P(2)(d)?

Section 80P(2)(d) gives cooperative societies a deduction on the income they earn as interest or dividends from investments made in other cooperative societies.

In short:

If one cooperative society invests in another cooperative society and earns interest or dividend, that income can be deducted from total taxable income.

This provision was introduced to promote mutual support among cooperative societies and encourage them to invest in one another.

Who can claim this deduction?

Only cooperative societies registered under the relevant cooperative laws can claim this deduction. However, cooperative banks and urban cooperative banks are not eligible for this benefit after amendments introduced in recent years.

Eligible – Housing cooperative society, credit cooperative society, agricultural cooperative, consumer cooperative, etc.
  Not eligible – Cooperative banks (since they’re treated as regular banks for tax purposes).

What kind of income qualifies?

You can claim a deduction on:

• Interest income from investments or deposits made in another cooperative society.
• Dividend income received from shares held in another cooperative society.

The entire amount of such income is deductible — there’s no upper limit under this section.

Let’s Understand Section 80P(2)(d) With an Example 

Imagine GreenGrow Cooperative Society, a farmers’ cooperative. It invested ₹5 lakh in another cooperative society and earned ₹40,000 as interest during the year.
Under Section 80P(2)(d), GreenGrow can deduct ₹40,000 from its taxable income.

That means it pays no tax on that ₹40,000.

Conclusion 

Section 80P(2)(d) offers a 100% deduction on income from interest or dividends earned by one cooperative society from another. It’s a simple yet powerful tax benefit that encourages financial cooperation within the sector.