Posts Tagged ‘Association’

Association under Karnataka Apartment Ownership Act

Jun 11th, 10 / 0 Comments

Our Users have frequently requested for a set of Information / Documents that is typically required while registering an Association under the Karnataka Apartment Owners Act – 1972.

Below is the list.

1. Year of Construction of the Apartment Building.
2. Sanction Plans, Approval Plans and Occupancy Certificate of the Apartment Building.
3. No-Objection Certificates from Local Bodies.
4. Sale Deed/s of the Land on which the Apartment Building exists.
5. No. of Owners/Occupants in the Apartment Building and a few Sale Deeds of such owners.
6. Prospective name of the Apartment Association/Society.

Armed with the above information a Meeting can be held to elect the first Office Bearers. The Minutes of the Meeting can also note that By-Laws have been drawn, which will be authorized during the Registration process.

If you are forming a new Association, and require sample By-Laws, you can find them under the Document Repository after logging in to www.apartmentadda.com.

Information for Apartment Owners

Registration of Apartment Owners Association

Nov 2nd, 09 / 4 Comments

DocumentationWe have been receiving many questions related to the procedure for registering Apartment Owners Association / Home Owners Association in Karnataka, under the Karnataka Societies Registration Act – 1960 . Here are the answers.

To get the Association Registered before the Registrar of Societies the following  documents are to be prepared:

1. Proposal letter addressed to the Registrar of Societies for formation of Association duly signed by the Executive Committee Members.
2. Name of the Association.
3. Address of the Association.
4. Proceedings of the First General Body Meeting
5. Memorandum of Association
6. List of Governing Body/Executive Committee Members, with their passport size photographs.
7. Bye Laws (Rules & Regulations)

All the above documents to be prepared in Kannada for purpose of Registration.

The approximate expenses for purpose of Registration (legal help inclusive) will be around Rs.15,000 to Rs.18,000.

For professional assistance regarding registration of your Association, please email support@apartmentadda.com

Note: For learning more about Apartment Owners’ Association please see http://apartmentadda.com/blog/2009/03/10/a-guide-to-apartment-owners-associations-in-bangalore/

For knowing about the Documents required under Karnataka Apartment Ownership Act, please see http://apartmentadda.com/blog/2010/06/11/association-under-karnataka-apartment-ownership-act/

Information for Apartment Owners

Income Tax for Apartment Owners Associations

Sep 25th, 09 / 14 Comments
Are Apartment Owners’ Associations in India liable to pay Income tax? Which income categories are taxable and which are exempt? Do they need to file tax returns every year? These are a must-know for every Association Treasurer. Here is an article compiled from reliable sources*, that wishes to be of help.
Income Tax laws and the “Concept of Mutuality”
Apartment Owners Associations are categorised as Associations of Persons (AOP) under the Income Tax Law.
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.
So, what is taxable and what is not?
Income NOT subject to tax:
Contribution from Members
Maintenance Charges, Electricity charges, Penalties, Interest charged on outstanding Maintenance Charges etc. – are the typical contribution by members of the Association. The association merely works as an agent that collects these charges and uses them for various common expenses. Any surplus during a fiscal year is carried forward to the next fiscal year, with no tax implications.
Interest earned from Co-operative Banks
If any investment is made in co-operative banks, the interest earned from such investment qualifies for deduction @ 100% under section 80P(d)
Dividend
If the Dividend income is received from Indian Companies, the dividend is fully exempt under section u/s 10 (34). Dividend received from Co-operative Banks qualifies for exemption under 80P(d) is therefore 100% deductible.
Rentals received from members for utilizing facilities
If common facilities such as community hall, open spaces, terrace etc., are rented out to members for a fees, the income is not taxable, thanks to “Concept of Mutuality”
Income subject to tax:
Interest earned on Investments in banks other than co-operative banks.
Any interest earned from banks which are not co-operative banks
Rental Income from Advertisement Hoardings
This is fully taxable under the head Business Income / Income from other sources. However expenses which can be directly attributable to earning of this income can be claimed against this income on a proportionate basis. Here the payer is responsible to deduct TDS from the payments made to the association.
Rental from Mobile / Cable Towers etc
Rental from mobile & Cable Towers is taxable under the head Income from House Property; considering the same it is eligible for standard deduction u/s 24 (a) @ 30 % of the rent. Also if the association has taken loan to build the tower structure, a proportionate deduction can be claimed for interest paid on borrowed capital.
Rentals from use of open Spaces / Terrace – received from non members
“Concept of Mutuality” does not apply to this Rental and it is fully taxable under the head Income from House Property & may qualify for deductions mentioned in point 3 above.
To conclude, it is a must for associations to get PAN registered in the name of the association and file Income Tax Returns regularly. Even if an association does not have taxable income due to deduction available (e.g., investments only in co-operative banks), it is necessary for the society to prove this, which is possible only with a Income Tax return filing.
Sources: Our thanks to CAclubindia, The Hindu andeleminds.

TaxesAre Apartment Owners Associations in India liable to pay Income Tax? Which income categories are taxable and which are exempt? Do they need to file tax returns every year? These are a must-know for every Association Treasurer. Here is an article compiled from various sources*, that wishes to be of help.

Income Tax laws and the “Concept of Mutuality”

Apartment Owners Associations are categorised as Associations of Persons (AOP) under the Income Tax Law.

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.

So, what is taxable and what is not?

Income NOT subject to tax

a) Contribution from Members

Maintenance Charges, Electricity charges, Penalties, Interest charged on outstanding Maintenance Charges etc. – are the typical contribution by members of the Association. The association merely works as an agent that collects these charges and uses them for various common expenses. Any surplus during a fiscal year is carried forward to the next fiscal year, with no tax implications.

b) Interest earned from Co-operative Banks

If any investment is made in co-operative banks, the interest earned from such investment qualifies for deduction @ 100% under section 80P(d)

c) Dividend

If the Dividend income is received from Indian Companies, the dividend is fully exempt under section u/s 10 (34). Dividend received from Co-operative Banks qualifies for exemption under 80P(d) is therefore 100% deductible.

d) Rentals received from members for utilizing facilities

If common facilities such as community hall, open spaces, terrace etc., are rented out to members for a fees, the income is not taxable, thanks to “Concept of Mutuality”

Income subject to tax

a) Interest earned from banks other than co-operative banks

If investments are made in banks which are not co-operative banks, interest earned from such investments are subject to Income Tax

b) Rental Income from Advertisement Hoardings

This is fully taxable under the head Business Income / Income from other sources. However expenses which can be directly attributable to earning of this income can be claimed against this income on a proportionate basis. Here the payer is responsible to deduct TDS from the payments made to the association.

c) Rental from Mobile / Cable Towers etc

Rental from mobile & Cable Towers is taxable under the head Income from House Property; considering the same it is eligible for standard deduction u/s 24 (a) @ 30 % of the rent. Also if the association has taken loan to build the tower structure, a proportionate deduction can be claimed for interest paid on borrowed capital.

d) Rentals received from non members for utilizing facilities

“Concept of Mutuality” does not apply to this Rental and it is fully taxable under the head Income from House Property & may qualify for deductions mentioned in point 3 above.

To conclude, it is a must for associations to get PAN registered in the name of the association and file Income Tax Returns regularly. Even if an association does not have taxable income due to deduction available (e.g., investments only in co-operative banks), it is necessary for the society to prove this, which is possible only with a Income Tax return filing.

Sources: Our thanks to CAclubindia, The Hindu and Feeleminds.

Note: The Accounting Applications in ApartmentAdda – Maintenance Fee Tracker and Expense Tracker are tightly integrated with the residents database, making it very convenient to track taxable and non-taxable income. For more information please see the features page.

Information for Apartment Owners

Asset Tracker for Apartment Asset Management

Sep 14th, 09 / 0 Comments

ApartmentAdda is excited to announce the launch of the Asset Tracker! A simple and robust application, it equips the Apartment Association to ensure long life of Apartment Assets, and minimize repair costs by timely preventive maintenance.

Asset Tracker makes it very easy to record and maintain Association Assets such as – Electrical Devices (Transformer, Generator, Submersible Pump), Gym Equipments, Housekeeping Equipments, and any other Capital Asset.

Track Asset Details for preventive maintenance

Track Asset Details for preventive maintenance

All information can be accessed on one page, separated by tabs. Seller’s contact information and AMC provider’s contact information can be stored with Asset, email/sms alerts can be set up for preventive maintenance schedule, service history can be maintained and scanned documents such as warranty/user manual etc. can be stored in the Asset Record!

You can set the service alert emails/sms to go to the Facility Manager, as well as to selected Management Committee members. The alert content automatically includes the service provider’s contact numbers, so you can call them up and confirm the service appointment right after receiving the alert!

No more unpleasant surprises of the Submersible Pump breaking down due to missed servicing dates, or misplaced warranties and purchase invoices!

Asset Tracker is part of the Premium PRO package of ApartmentAdda.

Product Updates

A guide to Apartment Owners’ Associations in Bangalore

Mar 10th, 09 / 96 Comments

Come March – the typical fiscal year end, most Apartment Complexes in India get busy with their annual elections – to elect a new Management Committee of the Apartment Owners’ Association or the RWA – Resident Welfare Association.


But many of us Apartment Owners / Apartment Residents have often resurfacing questions on what exactly is the definition of an Apartment Owners’ Association? What is its purpose? Its powers? Its duties? Its alignment with the legislation?

Here is an attempt at compiling answers to the above questions . This is in relevance to Apartment Owners’ Associations in Karnataka. For other states in India, information is most welcome!

The terms Association and Society in this post are used interchangeably.

How is an Apartment Owners’ Association (referred to as the ‘Association’ hereafter) formed in Bangalore?

The Association is formed by 7 or more owners in the Apartment Complex approaching the Registrar of Societies together and make an application that:

  1. Says that they desire to form themselves in to a society under Karnataka Societies Registration Act 1960.
  2. Encloses a memorandum with following details: desired name of the Association, aims and objectives of the association, and who in the association will be authorized to correspond with the Registrar of Societies (typically the President of the Association).
  3. Encloses the Bye-laws (rules and regulations) of the Association.
  4. Encloses the prescribed fee.


All applicants sign on the application, along with a witness’ signature and Voila! an Association is born.

Note: The Association can also be formed under The Karnataka Apartment Owners Association Act – 1972. Documents to be produced include the certified building plan of the building as-built and proof of the property being registered under the Registraton Act  – 1908.

What are the various roles in the Association?

The Member: Every owner of the apartment complex is a member of the Association. In the case of joint ownership, the first person named in the title document is typically the member. No person who is not an owner of an apartment in the complex can be a member of the association.

The Associate Member: Any person, or persons, other than the owner, who is wholly residing, occupying or otherwise in lawful possession of any apartment in complex becomes an Associate member of the association. The Associate member pays maintenance charges to use common facilities, but does not have right to vote, unless authorized by the owner of the flat in writing.

The General Body (GB): All members of the association form the General Body – this is the supreme authority of the Association. The GB may alter, rescind, add, or amend the bye-laws, with the approval and consent of at least 13 members voting in general body. All members of the association are bound by the bye-laws. The decision of the GB is binding on all members.

The Management Committee (MC): A board of members elected by and from the GB, that represents the Association before all government and other official or non official bodies in all matters concerning the building and other rights and interests of the members. The MC is typically composed of a President, a Vice President, a Secretary, a Treasurer (together known as the Executive Committee) and 8 other members. The period of office of the elected members is typically 12 months. Such members are eligible for re-election for another term. The work of the MC is reviewed by the GB at the annual general body meeting or any other meeting.


As a member, what are my duties and rights?

Duties: Attend all General Body meetings, pay the dues decided by the General Body in a timely manner, abide by the Bye-Laws.

Rights: Vote in the elections – each member, irrespective of the apartment type & size has a single vote at Annual General Body Meeting or in any other official meeting, elections, of the association. Should a member have ownership of more than one apartment, the number of votes shall be in proportion to the number of apartments owned. The member has a right to authorize a proxy to vote in his absence.
Each member of the association has the right to inspect all records, books of accounts of the association with 3 days prior notice to the Management Committee.

What are the duties of the Management Committee?

  • Organize, social, cultural and recreational facilities and amenities for the resident, supervise the same and maintain or organize the maintenance of all common areas and amenities thereof.
  • Assign the responsibilities for carrying out day to day administration of building and affairs of association to the employees appointed for such purpose
  • Represent the members of the Association, in the matter relating to the building or arising in relation to it, with the aim of protecting their rights and interest
  • Encourage and promote religious, cultural and educational activities and promote charitable feelings amongst members.
  • Join hand with any other association for common and mutual benefits.
  • Open and maintain one or more bank Accounts of the association in the name of the association with any nationalized bank as decided by the committee.
  • Ensure that the income monies received by the association are applied in promoting the objectives of the association and are not available for distribution on any account amongst the members.
  • Keep in custody of all original documents connected to the land and building, licences issued by any authorities in relation of the said building or land

What are the duties and powers of the President, Secretary and Treasurer?

President

  • The president presides over all the committee meetings and has general control over all the affairs of the association. He/she is the person who can sue with the consent of the general body or defend any legal action against the association on behalf of the association, after taking appropriate legal advice.
  • All legal proceedings are instituted and continued or defended by the president. He/she signs all documents and papers and vakalats relating thereto in the name and on behalf of the association.
  • The president enters into contracts approved or delegated by the committee.
  • In the absence of the president, for any reason whatsoever, the committee may authorize the secretary or the treasurer to sign all such documents, papers etc for and on behalf of the association.

Secretary

The secretary is responsible for the executive administration of the association subject to the control of the committee.

Treasurer

  • The treasure has custody of all properties of the association including the funds of the association.
  • Heshe is empowered to operate the bank accounts of the association jointly, but not severally, with president, or secretary. Any such account operation is only for bonafide and authorized purpose of the association
  • The treasurer maintains a petty cash account for meeting the immediate petty expenses.

On the question of alignment of the Apartment Owners’ Association with the Courts of Law, here is a good article from The Hindu, albeit a bit dated. The takeaway from this article: “it is important that the association be held together by close bonds of trust and goodwill. ”

So, go ahead! Elect your new Association Management Committee, and let them assume office with the re-assuring knowledge that by their side is you, and is Apartment Adda*! :)

* Apartment Adda helps Apartment Owners’ Associations / RWAs achieve their goals by providing efficient communication and management tools online. For more information, please do visit us at www.ApartmentAdda.com

Note: The above article has been compiled from Karnataka Societies Registration Act and typical Bye-Laws of Apartment Owners’ Associations. Please be aware that each Association has its own set of bye-laws and there are chances that the definitions & duties in your Association is different from those laid out above. You are advised to study the bye-laws of your own association for an accurate understanding of your duties and rights.

Information for Apartment Owners