Free membership by club

[Mukund Honkan]

If certain club offer free membership to persons at repute to promote its membership what are the income tax & service tax implications on club

[DR.MARIAPPAN GOVINDARAJAN]

If your club is by means of mutuality there will be no liability of service tax either free membership or by paying entrance fee. If the club is proprietary service tax is liable. In respect of income tax if no income is received there would be no liability for income tax, in my opinion.

AI Summary

Service tax on club memberships: mutual clubs escape service tax while proprietary clubs attract it; income tax depends on receipts. Tax treatment of free or waived club membership depends on organisational character: a club operating by means of mutuality is not liable to service tax on free or entrance-fee membership, whereas a proprietary club is subject to service tax; income tax liability turns on actual receipt of income-no receipts, no income tax liability.