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What is an Apartment Owners Welfare Association?
An Apartment Owners Welfare Association or "Society" (as known in some cases) as the name suggests, is formed by the "members" (owners of the apartment) for the welfare of its "residents" (people living in the apartment - either owners themselves or tenants).
What does an Apartment Owners Welfare Association do?
The Association takes the responsibility of providing certain services to its residents such as keeping the premises clean, repairs and maintenance of common areas and amenities, security, etc.,
The Association also undertakes the responsibility of collecting monthly fixed charges for providing the above facilities from its members.
Does an Apartment Owners Welfare Association require any registration?
In Karnataka, all apartment associations are required to be registered under the Karnataka Apartment Ownership Act of 1972.
However, most of the apartment associations in Karnataka are registered under the Karnataka Societies Registration Act of 1960 and not under the Karnataka Apartment Ownership Act of 1972, which is incorrect. Section 3 of the Karnataka Society Registration Act of 1960 does not specify the registration of a society under this act.
What are the implications of not being registered under the correct Act i.e. Karnataka Apartment Ownership Act of 1972?
In case an apartment association is not registered under the Karnataka Apartment Ownership Act of 1972, legal remedies in case of any issue may not be available since the association has not been constituted under the right statute and is therefore not a separate legal entity.
What are the legal compliances for an Apartment Association?
The legal compliances for an apartment association are as follows:
Obtaining PAN from the Income Tax Department
Maintaining proper books of accounts
The books of accounts are open for inspection to all the members of the association.
Regular Meetings of the board shall be conducted every year (not less than 2 meetings per year)
Annual Meeting of members shall be conducted and the audited accounts shall be laid for approval.
Filing an Income Tax Return every year.
Filing monthly GST returns and annual returns where applicable.
Are Apartment Associations required to file Income Tax Returns every year?
Apartment associations are required to file an income tax return when the income exceeds the basic taxable limit which is 2.5 lakhs.
It is also to be noted that as per the concept of mutuality, income/ receipts from members is not taxable. Only non-member income is taxable.
Is GST applicable to Apartment Associations?
Apartment associations are required to obtain a GST registration in case the total receipt from members exceeds Rs 40 lakhs.
GST is to be charged in case the maintenance amount collected per month per member exceeds Rs 7,500.
Interesting fact: In case the collection is Rs 8000 per month per member but the total annual collection is 35 lakhs then no GST is to be charged.
Are Apartment Associations required to get their books audited?
Yes, under the Karnataka Apartment Ownership Act of 1972 the Association is required to file Audited Financial Statements with the Registrar every year.
For easy registration of Apartment Associations or for any other help feel free to reach out to ZAP Virtual Accountants
ZAP Virtual Accountants provide reasonable Monthly Bookkeeping and Accounting Services for Apartment Associations. These services include ITR filings, GST compliance, Annual Return filing and Audit.