Section 204 — Tax on income of certain new manufacturing co-operative societies

(1) Irrespective of anything contained in this Act but subject to the provisions
of Part A, B, E and this Part (other than section 203) of this Chapter, the in -
come-tax payable in respect of the total income of an assessee, being a co-operative
society, resident in India, engaged in the business of manufacture or production of
any article or thing, shall at the option of such assessee, be computed at the rates
specified in column A of the said Table, if the conditions contained in column B
thereof are fulfilled.
TABLE
Total income and rate of tax Conditions
A B
( a) 15% on the total income other than
the income mentioned in clauses
(b), (c) and (d);
( b) 22% (without any deduction or
allowance in respect of any ex -
penditure or allowance) on such
income,—
( i) which has neither been de -
rived from nor is incidental to
manufacturing or production
of an article or thing; and
Such co-operative society—
( a) exercises the option in the manner
provided in sub-section (2);
( b) has been set-up and registered on
or after the 1st April, 2023;
( c) has commenced manufacturing
or production of an article or thing
on or before the 31st March, 2024;
( d) the total income of which is com-
puted as per the provisions of
sub-section (3); and
26. Inserted by the Finance Act, 2026, w.e.f. 1-4-2026.
Total income and rate of tax Conditions
A B
( ii) in respect of which no specific
rate of tax has been provided
separately under this Part;
(c) 22% on short-term capital gains
derived from transfer of a capital
asset on which no depreciation is
allowable under this Act;
(d) 30% on the income deemed so
under section 205(4).
( e) fulfils all the conditions provided
in section 205(2).
(2) The option under this section shall be exercised by the assessee in the manner
as may be prescribed subject to the following conditions:—
( a) it shall be exercised on or before the due date specified under section
263(1) for furnishing the first of the returns of income for any tax year;
and
( b) such option, once exercised, shall apply to subsequent tax years;
( c) once the option has been exercised for any tax year, it shall not be sub-
sequently withdrawn for the same or any other tax year;
( d) where the assessee fails to fulfil the conditions contained in sub-section
(1) (Table: Sl. No. 1.B) in any tax year,—
( i) the option shall become invalid in respect of such tax year and
subsequent tax years; and
( ii) the other provisions of this Act shall apply, as if the option had not
been exercised for that tax year and subsequent tax years.
(3) For the purposes of sub-section (1), the total income of the assessee shall be
computed,—
( a) without any deduction under—
( i) Chapter VIII other than the provisions of section 146 27[ or 150]; or
( ii) sections specified in section 205(1)(a) to (g)32;
( b) without set off of any loss carried forward or depreciation from earlier tax
year, if such loss or depreciation is attributable to any of the deductions
referred to in clause (a).
(4) While computing the income of the assessee, the loss and depreciation, or both,
as specified in sub-section (3)(b) shall be deemed to have been given full effect to
and no further deduction for such loss or depreciation, or both, shall be allowed
for any subsequent year.
27[(5) In case of an assessee, being a co-operative society, which has exercised option
under sub-section (2), the requirements contained in sub-section (3) shall be modified
27. Inserted by the Finance Act, 2026, w.e.f. 1-4-2026.
to the extent that the deduction under section 149(2)(d)(ii)shall be available to such
assessee as does not exceed the amount of dividend distributed by it to its members at
least one month before the due date for filing the return of income under section 263(1).]