Budget 2026:
New tax deduction on inter-cooperative dividend income under new tax regime announced by Nirmala Sitharaman

Feb 1, 2026

Synopsis
Budget 2026: Finance Minister Nirmala Sitharaman announced new tax benefits in Budget 2026. Inter cooperative society dividend income will be deductible if distributed to members.

Finance Minister Nirmala Sitharaman in her Budget 2026 speech proposed to allow inter cooperative society dividend income as deduction under the new tax regime, to the extent it is further distributed to its members.

Finance Minister further proposed to allow exemption for a period of three years to dividend income received by a notified National Cooperative Federation on their investments made in companies up to 31 120, 26 this exemption would be allowed only for dividends, further distributed to its member cooperatives, supporting it sector as India's growth engine, India's global leader in software development services.

It enabled services, knowledge process outsourcing services and contract R and D services relating to software development, FM said in speech.

“These businesses and their segments are quite interconnected with each other. All these services are proposed to be clubbed under a single category of Information Technology Services with a common safe harbour margin of 15.5% applicable to all the threshold for availing safe harbour for IT services is being enhanced substantially from 300 crore rupees to 2000 crore rupees safe harbour for IT services shall be approved by an automated, rule driven process without any need for tax officer to examine and accept the application. Once applied by an IT services company, the same safe harbour can be continued for a period of five years at a stretch at its choice, she said.”

[The Economic Times]