“Apartment Owners’ Associations as AOPs: Audit , Income Tax and GST Compliance Explained”

A Society of Apartment Owners (commonly referred to as an Association of Apartment Owners or Resident Welfare Association (RWA)) formed as per RERA or under local apartment ownership acts is required to file Income Tax Returns under certain conditions.

Here's a detailed explanation:

✅ 1. Legal Status and Formation under RERA

• RERA mandates that once a majority of apartments are sold, the promoter must facilitate formation of a society, RWA, or association.

• Such a society is considered an Artificial Juridical Person (AJP) or Association of Persons (AOP) under the Income Tax Act.

✅ 2. Is Income Tax Return Filing Mandatory?

Yes, filing of income tax return is mandatory if the taxable income before exemptions exceeds the basic exemption limit.

• Basic exemption limit: ₹2.5 lakh (for AOPs).

• Exemptions apply only to certain types of income.

  
  

✅ 3. Common Income Sources of a Society

Source of Income	Taxability
Member contributions (maintenance, corpus)	Exempt under the principle of mutuality
Interest on fixed deposits / savings	Taxable
Rental income from mobile towers / hoardings	Taxable
Income from non-members	Taxable
Donations (non-member)	Taxable, unless proven voluntary and for corpus

✅ 4. When Is ITR Filing Applicable?

The Society must file ITR-5 if:

• Taxable income (interest, rent, etc.) > ₹2.5 lakh before claiming deductions.

• TDS has been deducted and refund is to be claimed.

• The Society has obtained a PAN, which implies obligation to file if income criteria is met.

• For transparency and record-keeping, even if exempt, some societies file ITR to maintain compliance.

  
  

✅ 5. Which ITR Form?

• ITR-5 is applicable for AOPs, BOIs, societies, and co-operative institutions.

✅ 6. Due Date for Filing

• 31st July (for societies not required to be audited).

• 31st October (if audit under Income Tax Act is applicable — turnover > ₹1 crore or professional receipts > ₹50 lakh or under Section 44AB if required).

  
  

✅ 7. TDS and Compliance

If the Society:

• Pays more than ₹30,000 p.a. to a contractor or professional, TDS deduction is required.

• Deducts TDS, it must file TDS returns quarterly.

TDS Compliance

Item

Threshold

Section

Contractor payments

> ₹30,000 (single) or ₹1 lakh (aggregate/year)

194C

Professional fees

> ₹30,000/year

194J

Rent for hall/space (to individuals/HUF)

> ₹6 lakh/year

194I

TDS Return Filing

Quarterly (Form 26Q)

TDS Payment Due Date

7th of following month

✅ Summary

Condition	Is Income tax returns Filing Mandatory?
Only collects from members, interest < ₹2.5L	Not mandatory, but advisable
Interest/Rent/Other Income > ₹2.5L	Yes
TDS to be claimed or deducted	Yes
Registered under RERA	Formation doesn't affect tax status — income does

Accounting and Audit

Item	Frequency
Accounts Maintenance	Monthly/Quarterly
Year-End Accounts Finalization	Annually
Audit under Societies Act / State Act	Mandatory depending on local law or bye-laws
Income Tax Audit (if applicable)	As per IT Act if conditions met

Taxable Supply under GST for Apartment Owners' Associations (RWAs/Societies)

✅ What Is Taxable?

Activity	Taxable Supply?	GST Rate	Notes
Maintenance charges from members (if > ₹7,500/month/member)	✅ Yes	18%	GST applicable only on the entire amount, not just on excess, if threshold is crossed
Non-member contributions	✅ Yes	18%	No exemption for non-members
Renting out premises for commercial use (e.g., party halls, guest rooms)	✅ Yes	18%	Considered commercial service
Renting out space for mobile towers / hoardings	✅ Yes	18%	Treated as commercial rental
Interest income on bank deposits	❌ No	Exempt	Purely interest income is exempt (not a supply)
Penalty/late fees from members	✅ Yes	18%	Treated as supply of service
Sale of scrap or old equipment	✅ Yes	18%	Treated as sale of goods
Sinking fund, corpus fund (used only for long-term purposes)	🚫 Generally No	NA	Not taxable if held in trust and not used for regular ops