The Government has ruled out any proposal to extend tax benefits to cooperative societies on interest earned from deposits with scheduled commercial banks, while clarifying that cooperative banks are free to determine lending rates for PACS based on their own financial position and Board-approved policies.
Replying to a question in the Lok Sabha, Union Minister of State for Finance Pankaj Chaudhary said interest rates on deposits of Rural Cooperative Banks are regulated by the Reserve Bank of India (RBI), while lending rates to PACS and other cooperative institutions are decided by individual cooperative banks after considering factors such as cost of funds, regulatory requirements and financial health.
The Minister also informed that the Central Board of Direct Taxes (CBDT) has no proposal to extend the benefit of Section 80P(2)(d) of the Income-tax Act to interest earned by cooperative societies on deposits maintained with nationalised or private banks.
Highlighting measures to strengthen the cooperative banking ecosystem, the Government said NABARD continues to support Rural Cooperative Banks through refinance, capacity building, digitisation of PACS, governance reforms and improved risk management practices.
It also noted that the Multi-State Cooperative Societies (Amendment) Act and Rules, 2023 have enhanced governance, transparency and accountability in the cooperative sector.
