a) Apartment Owners Associations are categorised as Associations of Persons (AOP) under the Income Tax Law. Hence ITR 5 is required to be filed for that.
b) The governing concept for applying income tax laws to the Association of Persons is the “Concept of Mutuality”. This concept means that the contributors to a fund and the beneficiaries of the fund – are identical. This in turn implies that there is no scope for individual profits or gains. Any surplus generated in this fund – which is income over expenditure – is held by the association for future utilization to the benefit of the contributors. Complete tax exemption is given to funds/surplus funds to which the “Concept of Mutuality” applies.
# Income NOT subject to tax
a) Contribution from Members
b) Interest earned from Co-operative Banks
c) Dividend
d) Rentals received from members for utilizing facilities
# Income subject to tax
a) Interest earned from banks other than co-operative banks
b) Rental Income from Advertisement Hoardings
c) Rental from Mobile / Cable Towers etc
d) Rentals received from non members for utilizing facilities
# If a RWA has interest income from savings or FD from amount invested in a nationalised bank can it give from 15G for non deduction of TDS if it declares that it’s income is not taxable.
# If TDS has already been deducted, then It can be claimed back while filing ITR.