India announces tax-free cooperative dividends for 3 years: Know key beneficiaries

New Delhi: The Indian government on Wednesday announced a three-year tax exemption on dividend income for national cooperative federations, a move designed to benefit small cooperative members and strengthen the cooperative sector.

Finance Minister Nirmala Sitharaman told the Lok Sabha that the tax relief will boost incomes for small members and encourage greater participation in cooperatives, while supporting inclusive economic growth in India.

“Cooperatives, along with micro, small and medium enterprises (MSMEs) and farmers, are vital for job creation and economic development,” FM Sitharaman said during discussions on the Finance Bill 2026. She added that empowering these sectors is essential for inclusive growth, particularly in rural areas.

Data centre tax provision and safe harbour rule

The Finance Minister also highlighted a new provision for data centre services under the safe harbour rule. Resident Indian companies providing such services to related foreign entities will now be allowed a 15 per cent margin on costs.

“This ensures operations in India are genuine and profitable, while preventing the creation of shell entities with no real business activity,” FM Sitharaman explained.

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Public welfare spending and compliance simplification

Addressing concerns over government finances, she noted that in some instances, the Centre has spent more than it collected from cess and surcharges, reflecting a focus on public welfare initiatives.

The government has also converted penalties for technical defaults into fixed fees, a step expected to simplify compliance and reduce uncertainty for businesses.

Passenger allowances rationalised

Additionally, passenger allowances have been rationalised to reduce disputes at airports, making travel processes smoother for citizens.

FM Sitharaman emphasised that these measures are aimed at strengthening key sectors, improving the ease of doing business in India, and ensuring that economic growth benefits a wider section of society.

IANS