Union Budget 2026 | Centre extends tax benefits to cooperatives engaged in supply of cattle feed, cotton seed

New Delhi: Extending tax sops to the cooperative sector, Finance Minister Nirmala Sitharaman on Sunday extended tax benefits to cooperatives engaged in the supply of cattle feed and cotton seed.

At present, deduction is allowed to a primary cooperative society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members. In her budget speech, Nirmala said she is extending the deduction to also include supply of cattle feed and cotton seed produced by its members.

She also said the government will allow inter-cooperative society dividend income as deduction under the new tax regime to the extent it is further distributed to its members.

The budget documents said, "The dividend received by a cooperative society from another cooperative society is allowed as a deduction in the old tax regime. Non-allowance of this deduction in the new tax regime may result in double taxation as it may be taxed in the hands of the members on further distribution by the cooperative societies. Therefore, it is proposed to allow the inter-cooperative society dividend income as deduction under the new tax regime to the extent it is further distributed to the members."

"I further propose to allow exemption for a period of 3 years, to dividend income received by a notified national cooperative federation, on their investments made in companies up to 31.1.2026. This exemption would be allowed only for dividends further distributed to its member co-operatives," she said.

The budget document said it is proposed to allow exemption to dividend income received by a notified national federal cooperative from a company for a period of three years. This deduction is limited to the dividend received on investments made till January 31 this year.

"Further, this exemption would be allowed only to the extent that the dividends are further distributed to the members of the cooperatives," it said.