CHENNAI: The Tamil Nadu government has urged the Union government to exempt Primary Agriculture Cooperative Credit Societies (PACCS) in the state from paying income tax, in order to strengthen the rural economy.
State Minister for Cooperation K R Periyakaruppan on Monday called on Union Home and Cooperation Minister Amit Shah in New Delhi and submitted a petition outlining a series of demands. Tamil Nadu Food Secretary J Radhakrishnan was also present during the meeting.
In his petition, Periyakaruppan emphasised that PACCS play a vital role in supporting rural communities by providing them with credit facilities and other services, including the implementation of state schemes regarding flood relief, cyclone relief, and Pongal gifts.
However, these societies are required to remit 2% to 5% TDS from their own funds or cash credit, despite not generating any income from their relief disbursements.
“Under Section 194N of the Income Tax Act, deduction of TDS at 2% (for amounts up to Rs 3 crore) or 5% (for amounts exceeding Rs 3 crore) is mandatory for the sum or aggregate of sums withdrawn as cash during a financial year. While the TDS amount is refundable after the filing of income tax return, the PACCS suffer an interest burden on the 2% to 5% TDS availed from cash credit, in addition to losing interest on the remitted TDS amount,” explained Periyakaruppan.
He further noted that TDS deduction results in liquidity shortages, adversely affecting PACCS operations. “Hence, PACCS should be treated on par with Agricultural Produce Marketing Committees (APMC) and be exempted under Section 10 (26AAB) of the Income Tax Act, 1961,” he added.
The minister also requested that cooperative banks be included in the panel of banks authorised to provide loans to beneficiaries under various Union government schemes, such as Vidya Lakshmi, Surya Ghar, and MSME schemes. Additionally, he urged the centre to exempt cooperative products from GST, thereby enabling the cooperatives to thrive.