Resident Welfare Association (RWA) Registration
Resident Welfare Association (RWA) is classified as Association of Persons (AOP) under Income Tax Law. A Resident Welfare Association (RWA) is an entity that stands for the interest of individuals living in a community or a society. The association is in charge of overseeing everyday issues of the occupants, sorting out events, overseeing amenities in the apartments and buildings and also representing members when and where needed on matters related to the place.
For the most part, the association is a group of members chosen by the society members. When chosen, the RWA Registration needs to register under the Societies Registration Act, 1860 and is administered by constitutional documents such as Memorandum of Association that illustrates their rights and objectives. At least seven individuals could subscribe in their name for MOA for registration under Registrar of Societies to shape themselves into a Society under Societies Registration Act, 1860.
RWA Registration could be lawfully framed by a group of Resident Owners. The requirements for registration differ from state to state. With Least 7 Individuals in the state could apply for RWA registration with Jurisdictional Registrar Office. In numerous states, Builder Apartment or Group housing society covered under state Apartment Act and therein Apartment Owners Association (AOA) Resident could be formed. Also, in different cases, RWA can be formed as well. However, these associations run on subscriptions acquired from members and this is exempt on the mutuality basis in the view that nobody could make income out of himself.
Get your RWA registered in the fastest possible manner.
It usually takes 15 to 25 working days, depending upon government approval.
- Name approval
- Preparation of MOA and Rules & regulations
- Preparation & Filing of Forms
- Issue of Incorporation Certificate along with PAN and TAN
- Assistance in Opening Bank Account
- Businesses looking to expand or scale operations on higher level
- People aiming to work with members in a group and help each other grow
- Prepare Documents - Prepare all the required documents according to rules of State Society Registration Act, State Apartment Act or Society Registration Act 1860 as the case applicable in the respective state along with guidelines issued through Registrar.
- Draft Bye-Laws - Prepare a Bye-Law according to Model Bye-Laws asset in the Applicable Act in the state of registration.
- File Application with Documents - File application alongside necessary documents and Bye-Laws with jurisdictional Registrar.
- Filing procedure is partly Online in a few states; otherwise, the whole process is offline and need to visit Registrar Office.
- Pay fee - Make the payment of Government fees by Online/Cash/any other mode as the Registering authority accepts.
- Registration Certificate - Once the name and Bye-Laws approved, the Registrar issues Registration Certificate. This entire procedure takes at least 25 to 90 days by the Registrar in the normal course.
- Covering Letter.List of Body members ( name, Full address, Occupation and Signature on the list).
- Address proof of all Body Members ( Voter ID/Aadhar/Driving License)
- Address proof of Society Registered Address ( Utility Bill/ Rent agreement with NOC from Owner).
- PAN card of all Body members.
- Memorandum and Bye-Laws of the proposed Association.
- One Affidavit from President ( on stamp paper, notarized).
- Power of Attorney.
- Building Completion certificates issued by concerned authority ( if apply for Apartment owners association in some states).
- Builders Consent and/or Representation ( if apply for Apartment owners association in some states).
- Home Registry copy ( apply for RWA formation only).
- Buyers Association Essential requirement:- If form at State Level - minimum 7 body members from same state OR format central Level - Minimum 7 members from each state.
- RWA/Apartment Owners Association Essential requirement:- Minimum 7 body members from the same state. In case of AOA, this minimum number varies state to state as per the state apartment ACT.
All About Resident Welfare Associations
What is a Resident Welfare Association?
RWAs are registered under the Societies Registration Act, 1860. Each state may have amendments included from time to time and these shall be applicable on all RWAs in that particular state. Being registered under the Societies Registration Act, means that the RWA is governed by constitutional documents and cannot work according to its own will. The documents ensure that RWAs have special powers but their powers are also checked, if need be. It can be sued and can sue, as well. For all legal purposes, it is a legal body with rights.
Within a society, there are many aspects to be taken care of, where the RWA or its president’s role is crucial. These may include looking into the condition of internal roads, improvement in amenities and common facilities, drainage, street lights, overall cleanliness, water harvesting and civic amenities such as water and electricity. In bigger societies, the RWA may have more work, for example, looking into commercial activities within the society in the form of shops, bazaars, banks or even transportation in the area.
Role of RWA Office Bearers
Each RWA will have its own president, vice-president, general secretary, secretary, treasurer, finance advisor and executive members. Their powers and functions are elaborated below:
- Preside over all meetings of the general body and governing body.
- He/she has the vote on a draw.
- Supervision of work done by office bearers.
- May operate the bank accounts of the society.
- Assist the president in his/her duties.
- Fill in for the president in his/her absence.
- Represent the society in public or private office.
- Keep records of society and members.
- May operate the bank accounts of the society.
- Take over the role of the general secretary in his/her absence.
- Assist the general secretary from time to time.
- Collection of subscription, gifts, grants-in-aid and donations from the members and the general public.
- Maintain records of accounts of the society’s funds. These funds need to be maintained in a scheduled bank.
- Operate the bank account of the society.
- Assist in the day-to-day work of the society.
- File the list of office bearers with the Registrar of Societies, when need be, as per Section 4 of the Societies Registration Act, 1860.
Powers of the RWA
The RWA decides the amount of subscription for every resident. Although all residents can ask for a membership, the RWA can refuse such membership after communicating the reason for the same. The RWA can also terminate the membership of any resident owing to his/her death, failure to pay subscription charges, if they work against the principles of the society, if the society members demand termination on a valid ground or even if the resident does not attend any meeting. Additionally, it is the responsibility of the RWA to operate and implement the initiatives and policies within the society. Note that while membership is open to all, only those residents who have registered for a membership, are eligible to be called members.
Financial year of RWA
It begins from April 1 every year to March 31.
Funds of RWA
The funds of the society need to be kept in a scheduled bank and the account can be operated by the treasurer, president or the general secretary only. A qualified auditor, appointed by the governing body, shall audit the accounts.
How are RWA members selected?
The governing body of the society is elected for a specified tenure during the meeting of the general body. Residents can raise their hand during the meeting, to elect a person. The final list of office bearers, not less than seven, must be attested by three outgoing bearers and thereafter, filed with the registrar of societies.
Amendments to RWA rules
Amendments are welcome in the Memorandum of Association and such rules are carried out in accordance with procedure laid down under Section 12 and 12A of the Societies Registration Act, 1860.
Is RWA mandatory for every housing society?
According to Real Estate (Regulation and Development) Act, 2016, a residents welfare association (RWA) must be established in a housing society, within three months from the time that a majority of the houses there have been booked. If a developer does not take steps to form an RWA for such a society, the legal owners can themselves form such a body.
Do RWAs have statutory powers?
No, RWAs are voluntary associations and while they have considerable power and authority, it cannot impact your right over your own property. In comparison, cooperative housing societies have more power.
Moreover, RWA does not possess the right to infringe on any homeowners’ right to privacy or speech. An RWA can only exercise its power or restraint in matters of society/building maintenance or functions or even workshops.
Tax Filing of Resident Welfare Association
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). This is applicable if The Housing Society / Association and the chosen Co-Operative Bank are members of the same cooperative, bringing them under Principle of Mutuality.
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.