All about residents welfare association

By Ashok Kumar

What is Resident welfare association?

A Resident Welfare Association (RWA) is a body that represents interest of people living in a community or a society. The association is responsible for managing day-to-day problems of the residents, organising events, managing facilities in the apartments and complexes and safeguarding the rights of the unit holders.

A Resident Welfare Association (RWA) is an integral part of modern-day societies. With hundreds and thousands of families living together in societies and townships, it is essential to have a body of elected members who are responsible for time-to-time maintenance of the society, resolving problems of the members, organising events and ensuring a safe and secure environment for the members.

How is an RWA formed?

Generally, the association is a group of members elected by the society residents. Once elected, the RWA has to register under the Societies Registration Act, 1860 and is governed by constitutional documents such as Memorandum of Association that encapsulates their functions and objectives. Seven or more people can subscribe their name for MOA for registration under Registrar of Societies to form themselves into a Society under Societies Registration Act, 1860.

Who can be a member of RWA?

The membership of RWA is open to any member of the society who is a major and a resident of the said society and is keen to participate in the development of the society and abides by the terms and conditions of the society.

What are some membership rules of RWA’s?

The RWA has the right to deny membership to an individual post citing the reason for refusal in writing to the concerned person.

The membership is subject to termination if the member is working against the aims and objectives of the society, or the person dies, resigns or fails to attend three successive meetings without intimating in writing.

Altogether, RWA is an important body for a society. Therefore, the members representing the association should be well-deserving candidates with years of experience, acumen and knowledge in the realm. Also, the members should be willing to participate in societies’ development and take the onus of responsibilities assigned.

Now let us see various compliance requirements for resident welfare association:

Maintenance of books of accounts:

Generally, all state driven Societies registration act requires mandatory maintenance of books of accounts by the society & get the books audited as well.

None the less to have a correct surplus or loss it is always better to maintain books of accounts.

Income Tax Act 1961:

Resident welfare association (RWAs) is categorized as Association of Persons (AOP) under Income Tax Law. They act as the voice of their members and not only take care of ensuring good maintenance of the place but also represent members when and where needed on matters related to the place.

Concept of Mutuality & taxation of contribution received from members:

To tax any amount under income tax there should be income, to treat any receipt as income there should be flow of money from one person to other person. It means beneficiary & payer should be different.

In the case of RWA members come together, contribute the amount & the amount so contributed will be spent for members welfare. By this the concept of payer & beneficiary are missing in case of contributions received from members as a result the contributions are not taxable under Income tax act 1961.

Interest Income earned on deposits with banks/cooperative societies:

RWA may deposit the surplus funds if any bank or any other financial institution & on such amount it earns the interest or dividend.

Both such interest & dividend incomes are taxable in the hands of RWA.

Rental Income from Advertisement Hoardings:

This income is taxable under income from other sources. However, RWA can claim expense to earn this income & the net income shall be taxed.

In a nut shell if RWA receives any income form persons other than members it is taxable under normal provisions of Income tax Act 1961.

Filing of Return of Income:

To conclude with we can say that if Income received by RWA from Non-Member exceeds the taxable limit then only RWA is liable to file the Income Tax Return in Form ITR-5.

Tax Deduction at Source:

Every RWA wherever required, to deduct tax at source (TDS) under Chapter XVII-B of the Income-tax Act, 1961, failing which the association shall be deemed as assessee in default in respect of such tax.

Goods & Service Tax Act 2017

A Society is akin to a club, which is composed of its members. So, can a service provided by a Housing Society to its members be treated as service provided by one person to another. The answer is yes.

The concept of mutuality does not apply under GST act, that means even if supply is made to self still it is taxable under GST.

The general criteria are that every person whose turnover crosses the amount ₹20L has to get registered under GST & shall comply with all the relevant provision like, invoicing, maintenance of books, return filing, audit & any other compliance.

However, if the amount of monthly maintenance collected from member does not exceed ₹7,500/- then RWA need not collect GST on the same.

The below table would give clear picture of what to be included & what to be excluded from ₹7,500/-

In simple terms to collect GST the turnover of RWA should exceed ₹20L & monthly taxable contributions from members should cross ₹7,500/-.

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