Saturday, August 1, 2020 saw the Sixth Episode of the Neighbourhoods of Tomorrow – Interactive Webinar Series hosted by the ADDA Team on The A-Z of Apartment Accounting : Taxation, Closing Of Books, Audit. The first part of this webinar series on housing society accounting saw a panel of experts presenting all details about the Taxes to be paid and the timeline, things to keep in mind while closing books and audits. The panel included :
Mr. Sunil A, Customer Success Manager at ADDA.
Mr. Pritesh Dhawde, Regional Manager (Partnerships & Alliances), ADDA.
Mr. Diwakar Koyande & Mrs. Disha Koyande, ADDA Accounting Service Partners.
Mr. Suresh Kumar, ADDA Accounting Service Partner.
The Takeaway
A housing society accounting book must show the following taxes paid every financial year :
- GST
- Professional Tax
- TDS
- Advance Tax
- Society Renewal.
Click here for a complete detailed information about the tax rates, tax slabs and tax schedules. As housing societies grow with respect to the number of units, it is advisable to shift to an online system of accounting to avoid manual errors that can lead to hefty tax penalties.
Click here to download the Webinar Presentation for a detailed overview.
The Q&A Session On Housing Society Accounting
Q1: Clarification on Input & Output GST
A: A housing society accounting registering over 20 lakhs INR, irrespective of individual maintenance payment being below or above 7500 INR, is liable to pay GST. They are legally bound to get registered and avail the benefits of Input Tax. Every society pays input tax through stationery items, AMCs, Service taxes, etc. To get the benefit of this Input GST, the society must have Output GST too. Most societies across India follow the following 8 components in a bill :
- Property Tax
- Sinking Fund
- Repair Fund
- Insurance
- Service Charge
- Education Training Fund
- Water Charges
- Electricity
Bills can have other account heads like Non-Occupancy Charges, Parking Charges, Late Payment Interest, etc. These extra heads attract GST that would help the society obtain Output GST which will offset some of the Input GST.
Q2: My society account has a balance of amount X INR at the end of the Financial Year. Do I have to pay income tax?
A: Yes, the society is liable to pay taxes but only on the interest generated.
Q3. Clarification on GST returns.
A: The turnover threshold is 20 lakhs INR. This turnover also includes items that are GST exempted. Therefore, when GST returns are filed, the return is proportionate to the GST charged on non-exempted heads. Therefore, the GST return is not based on 100% of the turnover.
Q4. How to calculate late payment interest for long time defaulters (2-3 years) and what are the legal options of recovery for this amount?
A: Different states have a capping on the maximum late payment interest that can be charged. Karnataka caps this rate at 21%. The society has to pass a bye-law fixing it’s preferred rate of interest, that cannot exceed the rate fixed by the State Government. The interest is calculated as Simple Interest. As long as the rate charged by the Association is below the capped amount as fixed by the State, the defaulter, as per the bye laws is liable to pay the entire sum owed to the society. However, the Association can choose to waive off certain amount of interest to collect a major share of the principal.
Q5. What are the tax implications in the following three scenarios :
- Income from a Non-member
- Interest on Sinking Fund
- Non recovered late payment Interest
A: Societies are mandatorily required to file Income Tax returns and also pay the Income Tax. All amount collected from the members of the Society – maintenance, parking charges, repair funds, sinking funds, etc. are not part of taxable income.
Interest on Sinking Fund is not taxable if it is invested in a co-operative bank and the deduction can be claimed under Section 80P 2D. However, if Sinking Fund or Repair Fund is invested in a non-cooperative bank like HDFC, SBI, Canara, etc. the interest is taxable as per slab rates. Recovered or non-recovered late payment interest is not taxable. Income from party hall rent to third party, ATM charges, kiosk, promotional activities, etc is taxable.
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