Clause 27 of the Finance Bill, 2026 proposes an amendment to section 2(32) of the Income-tax Act, 2025, which defines the term “co-operative society” for the purposes of the Act. The amendment seeks to explicitly include co-operative societies registered under the Multi-State Co-operative Societies Act, 2002 within this definition.
The amendment addresses a definitional omission in the current law and applies from 1 April 2026, i.e. tax year 2026-27 onwards.
Existing Definition under Section 2(32)
Current Statutory Wording
Section 2(32) presently defines a “co-operative society” as a society:
- registered under the Co-operative Societies Act, 1912, or
- registered under any other law in force in any State or Union Territory for the registration of co-operative societies.
Issue with the Existing Definition
Co-operative societies registered under the Multi-State Co-operative Societies Act, 2002 are:
- registered under a Central legislation, and
- not registered under a State or Union Territory law.
As a result, such societies were not expressly covered by the literal wording of section 2(32), even though they are co-operatives in substance and function. This created interpretational ambiguity wherever the Income-tax Act, 2025 applies specific provisions to “co-operative societies”.
What Clause 27 of Finance Bill 2026 Proposes
Clause 27 proposes to amend section 2(32) to expressly include “co-operative societies registered under the Multi-State Co-operative Societies Act, 2002 within the definition of “co-operative society”.
The amendment is inclusive and clarificatory, ensuring that co-operatives registered under Central law are placed on the same footing as those registered under State or Union Territory laws.
Nature of the Amendment
- The amendment does not create a new class of taxpayers.
- It merely clarifies and completes the definition to reflect all recognised co-operative registration regimes in India.
- There is no change to the substantive charging provisions, tax rates, or eligibility conditions under other sections.
Key Implications
1. Removal of Interpretational Ambiguity
After the amendment, multi-state co-operative societies will clearly fall within the statutory definition of “co-operative society” under the Income-tax Act, 2025, eliminating scope for disputes based on registration law.
2. Consistent Application of Co-operative-Specific Provisions
Any provision of the Act that applies to a “co-operative society” will apply to multi-state co-operatives without qualification or interpretative risk, whether the provision is beneficial or regulatory in nature.
3. No Automatic Grant of Tax Benefits
The amendment:
- does not automatically confer deductions, exemptions, or concessional rates, and
- does not modify conditions attached to any such benefits elsewhere in the Act.
Eligibility will continue to depend on the specific provision invoked, not merely on definitional inclusion.
Summary of the Amendment
Clause 27: Key Details
| Aspect | Position After Amendment |
| Provision amended | Section 2(32), Income-tax Act, 2025 |
| Change | Explicit inclusion of multi-state co-operatives |
| Law covered | Multi-State Co-operative Societies Act, 2002 |
| Nature | Clarificatory / definitional |
| Effective date | 1 April 2026 |
| Applicable from | Tax year 2026–27 onwards |
What the Amendment Does and Does Not Do
What It Does
- ✔ Clarifies that multi-state co-operatives are “co-operative societies”
- ✔ Ensures uniform interpretation across the Act
- ✔ Aligns tax law with Central co-operative legislation
What It Does Not Do
- ❌ Does not introduce new tax incentives
- ❌ Does not alter tax rates or compliance rules
- ❌ Does not apply retrospectively to earlier tax years
Effective Date
✔ 1 April 2026
✔ Applicable from tax year 2026-27 onwards
Conclusion
Clause 27 of the Finance Bill, 2026 makes a precise and necessary definitional correction by expressly including co-operative societies registered under the Multi-State Co-operative Societies Act, 2002 within section 2(32) of the Income-tax Act, 2025. The amendment removes uncertainty arising from the coexistence of State and Central co-operative laws and ensures consistent tax treatment of co-operatives, irrespective of their registration framework.
The change is clarificatory in scope, strengthening statutory coherence without expanding or curtailing substantive tax rights.
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