Cooperative Societies
Contributed by: Neha Kujur
Email id: neha@simplybiz.in
Introduction to Cooperative Societies:
The concept of a Cooperative Society is not novel. It is operated into various sectors such as agriculture, consumer goods, finance, healthcare, and more. Cooperative Societies were initially established to safeguard the interests of vulnerable groups but have now grown into a well settled establishment for voluntary association for mutual benefits of members. These cooperative societies are voluntary associations of individuals coming together for a common goal of member welfare and mutual assistance. A Cooperative Society usually comprises of individuals, predominantly workers and small-scale producers, who unite under democratic management to enhance their living and business conditions while pooling resources.
Central and State Legislation governing Cooperative Societies:
In India, cooperative societies are governed by both central and state legislation. The primary central act regulating cooperative societies is the “The Cooperative Societies Act, 1912”. On the other hand, each state in India has its own legislation concerning cooperative societies. These state acts govern cooperative societies whose operations are confined within the boundaries of that particular state. For example, in Telangana, one of the prominent states in terms of cooperative movements, the primary legislation governing cooperative societies is the “Telangana Cooperative Societies Act, 1964.” Similarly, other states have their own acts to regulate cooperative societies.
Co-operative Principles:
Cooperative Societies are governed by certain cooperative principles, which form the basis of any cooperative society. Without these principles, a cooperative society will lose its essence. These cooperative principles as mentioned in the Cooperative Societies Act, 1912 are as follows:
- Voluntary and open membership: Cooperatives are voluntary organizations, open to all persons without any discrimination.
- Democratic Member Control: Cooperative Societies are democratic organizations controlled by their members. They actively participate in setting its policies and decision making.
- Member’s Economic Participation: There is an equal contribution by each member. A large part of the profit arising out of the activities are distributed among the members.
- Autonomy and Independence: A Cooperative Society is a self-help organization controlled by its members. They ensure the cooperative autonomy while entering into any agreements with the external sources including the Government.
- Education, Training and Information: Cooperative Societies provide education and training to their members for an effective contribution for the development of the society.
- Concern for community: While focusing on the needs of their members, Cooperative Societies work for the sustainable development of communities through various policies.
The Telangana Co-Operative Societies Act, 1964
Cooperative societies in Telangana are governed by the Telangana Co-operative Societies Act, 1964. An association of persons willing to register under this act, can be registered as cooperative society under this act, which has as its main object, the promotion of the economic interests of its members in accordance with the Co-operative principles.
- Memberships and the eligibility of Members
According to the central act, a Cooperative Society can be formed with a minimum of 10 members with no limit on the maximum number of members. However, for registration of a cooperative society under the Telangana Cooperative Societies Act, 1964, at least 21 members, who are individuals should come together and resolve to form a Society.
- Who can be the members of a cooperative society?
- An individual-
- Who has attained majority, and
- is of sound mind, and
- has paid the minimum share capital, and
- possess such qualifications as prescribed in the bye-laws.
- A Society registered or deemed to be registered.
- The Government.
- Constitution of committee
- The general body of a cooperative society shall form a committee as outlined in the bye-laws, delegating the management of the society’s affairs to said committee.
- The Board/Committee shall comprise the number of Directors as prescribed, ensuring that the total number of Directors in a Cooperative society does not exceed 21 (twenty-one).
- The President shall be elected by the members of the committee from among themselves.
- The term of office of the committee and its Office Bearers including President shall be 5 (five years) from the date of election of the members of the committee.
- General and Committee meetings:
- General Meetings: A cooperative society must convene a minimum of 2 (two) general meetings of its members, ensuring that one meeting is held in each half-year period.
- Committee Meetings: A cooperative society must ensure to convene at least one meeting every three months.
- Allocation of funds/Disposal of Profits:
| S.No. | Particulars | % of Profit |
| 1. | Cooperative Education Fund | 1% |
| 2. | Salaries and other allowances to employees | Not more that 30% of gross profit, or 2% of working capital (whichever is less) |
| 3. | Transfer to reserves | Not less than 25% of its net profits |
| 4. | Dividends to its members | Not less than 15% of its net profits |
| 5. | Rebate to members on the amount or volume of business done by them | Not less than 15% of its net profits |
- Registers and Compliances:
The registers and other compliances change according to the type and nature of a cooperative society. Some of the common compliances and maintenance for statutory records and registers of a cooperative society are as under:
- Register of members
- Register of loans
- Drafting of Notice of Meetings
- Maintaining Registers of Members
- Preparing of Minutes of Meetings
- Reporting of Governing Body structure to Registrar of Societies
- Preparation of Books of Accounts of Company
- Preparation & Filing of Income Tax Return
- Assessment & Payment of Advance Tax
- Assessment & Filing TDS Return
- Filing of Monthly/Quarterly GST Return (if applicable)
- Filing of Annual GST Return (if applicable)
Deduction in respect of Cooperative Societies under Income Tax Act, 1961:
| Sl. No. | Particulars | Extent of Deduction allowed |
| 1. | A Cooperative society engaged in (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of agricultural produce grown by its members, or (iv) the purchase of agricultural implements, seeds, livestock, or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labor of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members |
The whole of amount of profits and gains |
| 2. | A Cooperative Society primarily engaged in the supply of milk, oilseeds, fruits, or vegetables raised or grown by its members to a. a federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be; or b. the Government or a local authority; or c. a Government Company |
The whole of amount of profits and gains |
| 3. | a co-operative society engaged in activities other than those specified above in points 1 and 2: a. Being a consumer’s cooperative society b. Any other society |
Maximum of ₹ 1,00,000/- Maximum of ₹ 50,000/- |
| 4. | any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society | Whole of such income |
| 5. | any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities | Whole of such income |
Conclusion
A Cooperative Society is a great example of an association of persons coming together for a common purpose for mutual benefits. Its plays an important role in fostering community driven initiatives, through shared decision-making, equitable distribution of benefits, and a focus on meeting members’ needs, contributing to build resilient communities, empowering marginalized groups, and addressing socio-economic challenges, thus offering a pathway towards more equitable development of the group.
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