Question 1

Can you show how the sinking fund contribution is worked out for one flat and for the whole society?

Accepted Answer

Take the flat's construction cost certified by the architect (excluding land under the 2014 bye-laws), apply the general-body rate, at least 0.25 % a year, and divide by twelve for a monthly bill. A flat costing ₹15,00,000 pays at least ₹3,750 a year, ₹312.50 a month. The rule: a sinking fund contribution "at a rate determined in the general body meeting, subject to a minimum of 0.25 per cent. per annum of the construction cost of each flat, incurred during the building's construction and certified by the Architect" (Rule 106C-11(2); 106C-12(4) item 11(i)). The 2014 bye-law adds "excluding the proportionate cost of the land" (BL 13(c)). Synthetic society: 40 flats. The architect certifies construction cost of ₹15,00,000 for each of 24 two-bedroom flats and ₹22,00,000 for each of 16 three-bedroom flats. - At the minimum 0.25 %: two-bedroom ₹3,750 a year (₹312.50 a month); three-bedroom ₹5,500 a year
  (₹458.33 a month).
- Society total: 24 × ₹3,750 + 16 × ₹5,500 = ₹90,000 + ₹88,000 = ₹1,78,000 a year. - If the general body fixes 0.5 %, each figure doubles: ₹3,56,000 a year. Keep in mind: - The base is each flat's own cost, so larger or costlier flats pay more; this head is not shared
  equally.
- Only the general body can fix a rate above the minimum; the committee cannot. - Credit the collections and the interest they earn to the sinking fund, invest them, and record them
  in the Sinking Fund Register (BL 15, 140 item 6).
Over ten years at 0.25 % the society above would collect ₹17,80,000 plus interest, which is small against a major structural repair. That is why many general bodies fix a higher rate.

Question 2

Our building is 35 years old and nobody has an architect's certificate of construction cost. How do we fix the sinking fund base?

Accepted Answer

Appoint an architect to certify, with reasons, the cost incurred in constructing each flat, using the best records available. Put the certificate and the resulting per-flat base before the general body and adopt it by resolution. Until then, keep charging the existing rate on the base the society has used, and note the gap for the auditor. The Rules tie the minimum contribution to "the construction cost of each flat, incurred during the building's construction and certified by the Architect" (Rule 106C-11(2)). They do not say what to do when the original cost is not on record. A practical course: - Collect what exists: original agreements for sale, the builder's cost statements, stamp-duty
  valuations, municipal records, the conveyance or deemed-conveyance file.
- Engage an architect to certify a cost for the building as built and allocate it to flats in
  proportion to area (or the method the certificate explains). The certificate should say how it was
  arrived at.
- Place it before the general body, which fixes the rate on that base (Rule 106C-11(2)). - Record the resolution; a certified copy is needed for any recovery of these contributions
  (Rule 106C-14(2)(c)).
Synthetic example: the architect certifies a building cost of ₹2,40,00,000 for a total carpet area of 3,000 sq m, i.e. ₹8,000 per sq m. A 60 sq m flat's base is ₹4,80,000; at 0.25 % that is ₹1,200 a year. The general body may choose a higher rate to reflect today's costs. Because this is not settled in the texts, keep the approach consistent across all flats and explain it in the AGM notes.

Question 3

Our sinking fund is based on a 1995 construction cost, so it collects almost nothing. Can we switch the base to today's rebuilding cost?

Accepted Answer

The Rules fix the base as the cost incurred when the building was constructed, so the base itself does not move. What the general body can do is raise the rate above the 0.25 % minimum. The same result as a current-cost base can be reached by choosing a higher percentage, applied uniformly. Rule 106C-11(2) speaks of "the construction cost of each flat, incurred during the building's construction", with the rate "determined in the general body meeting, subject to a minimum of 0.25 per cent". The 2014 bye-law is the same (BL 13(c)). There is no provision for indexing the base. Synthetic example: a flat's 1995 construction cost is ₹4,00,000. At 0.25 % the contribution is ₹1,000 a year (₹83 a month). A structural engineer estimates that rebuilding would cost about ₹32,00,000 per flat today. To collect what 0.25 % of that would give (₹8,000 a year), the general body can fix the rate at 2 % of the 1995 base: ₹4,00,000 × 2 % = ₹8,000 a year (₹667 a month). Why keep the original base: every flat's share stays in proportion to its certified cost, which is what the Rules require. Using a new, uncertified base for some flats and not others invites challenge. Steps: get the structural audit and engineer's estimate of likely heavy repairs; propose a rate at the AGM with the reasoning; record the resolution. The sinking fund is used for heavy repairs as the general body approves (Rule 106C-11(2)); the 2014 bye-laws also needed the architect's opinion or certificate for the work (BL 14(c)).

Question 4

How is the repair and maintenance fund worked out, and what happens to money left unspent at year end?

Accepted Answer

At the general-body rate, at least 0.75 % a year of each flat's architect-certified construction cost. A ₹15,00,000 flat pays at least ₹11,250 a year (₹937.50 a month). Unspent money stays in the fund for later repairs; it is not income to be spent on running costs or refunded. Rule 106C-11(3) and 106C-12(4) item 11(ii): contributions at a rate fixed by the general body, subject to a minimum of 0.75 % a year of each flat's construction cost, "for routine recurring repairs of the buildings or properties of the Society". The 2014 bye-laws were the same (BL 13(a), 66(a)(iii)). Synthetic example: 40 flats, 24 at ₹15,00,000 and 16 at ₹22,00,000. - Two-bedroom: ₹11,250 a year; three-bedroom: ₹16,500 a year. - Total: 24 × ₹11,250 + 16 × ₹16,500 = ₹2,70,000 + ₹2,64,000 = ₹5,34,000 a year. - Repairs actually done in the year: ₹3,90,000. Unspent ₹1,44,000 stays in the fund. What the draft 2026 bye-laws add: the fund is "separately accounted for" (dBL 18(b)), and the committee may spend from it "in the ordinary course of management" (dBL 19(c)), within its annual spending limit (Rule 106C-13(5)). The 2014 bye-laws required the general body's prior approval for use of all funds (BL 14, closing words), which in practice was given through the budget. If repairs in a year exceed the fund, the shortfall should come from a general-body decision: a higher rate next year, the Major Repair Fund, or, for heavy repairs, the sinking fund. Using service-charge money or the sinking fund for routine repairs without that decision is an irregularity.

Question 5

The AGM approved ₹36 lakh of waterproofing and painting through the Major Repair Fund. How is my share calculated, and can I refuse to pay?

Accepted Answer

Your share is the job's cost in proportion to your flat's carpet area. For ₹36,00,000 over 3,000 sq m, a 60 sq m flat pays ₹72,000, in the instalments the general body decided. A valid general-body decision binds every member, including those who voted against it, and the contribution is recoverable like other dues. Rule 106C-11(4): the Major Repair Fund consists of contributions "at a rate fixed pro-rata on an area basis, as and when required, and decided by the general body", for significant repair and maintenance work. Rule 106C-12(4) item 11(iii) fixes the basis as "the carpet area of each flat/unit". The 2014 bye-law said "pro-rata on area basis" (BL 13(b)). Synthetic example: total carpet area 3,000 sq m; approved cost ₹36,00,000 (including consultant's fee and GST). Rate = ₹1,200 per sq m. Shares: 45 sq m flat ₹54,000; 60 sq m ₹72,000; 90 sq m ₹1,08,000. If the AGM decided six quarterly instalments, the 60 sq m flat pays ₹12,000 a quarter. Can you refuse? A member is bound by a validly taken general-body decision whether or not he agreed (Girish Mulchand Mehta; Maya Developers). The recovery rules expressly contemplate a resolution "approving the levy of charges or major repair funds" (Rule 106C-14(2)(c)), so unpaid instalments can be recovered under s.154B-29 with interest. What you can check: that the meeting had quorum and proper notice, the resolution fixed the amount and area basis, the tender process was followed for work above the general body's threshold, and the money is kept in a separate fund. A challenge to the validity of the resolution goes to the Co-operative Court under s.91.

Question 6

Must the sinking fund be kept in a separate bank account or FD, and what records prove it is intact?

Accepted Answer

It must be a separate fund in the accounts, invested with its interest, and recorded in a Sinking Fund Register. A separate bank account is not expressly required, but a dedicated FD or account whose balance matches the fund ledger is the cleanest proof that the money has not been used for running costs. The texts: - 2014 bye-laws: fund collections are invested long term "along with the interest earned thereon" in
  modes allowed by s.70 (BL 15); the society keeps a Sinking Fund Register and an Investment Register
  (BL 140 items 6 and 8).
- Draft 2026 bye-laws: sinking fund money "shall be separately accounted for" and used only on prior
  general-body approval (dBL 18(a), 19(b)); investments are recorded and placed before every AGM
  (dBL 20(h)(iv)).
Good practice that auditors look for: - a fund ledger showing opening balance, contributions for the year, interest credited, withdrawals
  with the resolution number, and closing balance;
- FDs held in the society's name marked for the sinking fund, listed in the Investment Register with
  maturity dates;
- a reconciliation at year end: fund ledger balance = FDs + any balance in the fund account. Synthetic check: fund ledger ₹18,40,000 at 31 March; FDs marked "sinking fund" ₹17,50,000; the ₹90,000 difference is March contributions still in the current account. Transfer it, or show it as "due to sinking fund" in the balance sheet, so the auditor does not report a shortfall. Using sinking fund money temporarily for running expenses is an irregularity auditors report (funds_investments-004).

Question 7

What exactly changed for the society's funds between the 2014 bye-laws, the 2026 Rules and the draft 2026 bye-laws?

Accepted Answer

The minimum rates did not change: 0.25 % for the sinking fund and 0.75 % for the repair fund. The Rules added an election fund (compulsory), a voluntary welfare fund, a corpus fund and "any other" funds collected equally, moved the major repair fund to carpet area, and made the education fund per member. The draft bye-laws widen sinking-fund uses and let the committee spend the repair fund in the ordinary course. 2014 model bye-laws (BL 12-15, 64-66): - Reserve fund; repair and maintenance fund (min 0.75 %); major repair fund pro-rata on area as needed;
  sinking fund (min 0.25 %, excluding land); education and training fund ₹10 per flat a month.
- Election fund appears only as a charge "equally by the Members" (BL 66(a)(xv)). - All funds used only with the general body's prior approval (BL 14). 2026 Rules (from 22 Jun 2026, binding on all; Rules 106C-11, 106C-12): - Reserve, sinking, repair and maintenance, major repair (carpet area), election (society "shall
  establish"), education and training (₹10 per member a month or the Government's rate if higher),
  welfare (voluntary contributions only), corpus (may maintain), any other fund with general-body
  approval, collected equally.
- Sinking fund "used for heavy repairs, as approved by the general body". Draft 2026 bye-laws (dBL 12-20, not yet final): - Sinking fund also for structural repairs, replacement of major assets and other capital expenditure
  on the buildings (dBL 18(a), 19(b)).
- Repair fund: committee may spend in the ordinary course (dBL 19(c)); major repair fund and sinking
  fund need prior general-body approval (dBL 19(b), (d)).
- Corpus fund defined and "shall" be maintained (dBL 4(x), 18). - Investments in "A"-class co-operative banks for three consecutive years, and an Investment
  Fluctuation Fund above 10 % of working capital in securities (dBL 20).

Question 8

What happens to the ₹10 a month education and training contribution? Where does the money go, and what must the society do with it?

Accepted Answer

From 22 Jun 2026 every housing society must contribute ₹10 per member per month (or the Government's higher rate) to the co-operative education and training fund, collected annually and used within that year or the next for training members, committee and staff through the notified State federal society or apex training institute. Rule 106C-7: - Every housing society shall organise annual education and training for its members, officers and
  employees through the State Federal Society or State Apex Training Institutes notified by the
  Government ((1)).
- It shall contribute ₹10 per member per month to the Co-operative Education and Training Fund;
  contributions are collected annually and used within the financial year or the next for training
  ((2)).
- As far as possible: one three-hour session a year for members; two for committee members,
  office-bearers and employees ((3)).
- The society makes provision every year and contributes to the fund of the notified institutions
  ((6)).
Rule 106C-12(4) item 11(iv) lets the society collect it from members at ₹10 per member or the Government's rate, whichever is higher. The 2014 bye-laws had ₹10 per flat per month (BL 66(a)(xiv)). Synthetic example: 80 members × ₹10 × 12 = ₹9,600 a year. Show it as a separate fund; pay it over as the notified institution directs; keep attendance records of the sessions. Open points: which institutions are notified, and how "per member" treats joint members or a member with two flats. Check the Government notification before fixing the billing basis.

Question 9

How much should we collect for the election fund, from whom, and what happens to any money left after the election?

Accepted Answer

The general body decides the amount; every member contributes equally, not by flat size. The fund is for conducting committee elections only. Money left over stays in the fund for the next election; it should not be moved to running expenses without a general-body decision. Rule 106C-11(6): the society "shall establish" an election fund of members' contributions and "shall collect contributions equally from all members for conducting elections of the managing committee, as decided by the general body". Rule 106C-12(4) item 11(v): "Equally by members". The 2014 bye-laws listed it as a charge shared equally (BL 64(xvi), 66(a)(xv)). The draft 2026 bye-laws say the fund is "separately accounted for" and used "exclusively" for committee elections (dBL 18(e), 19(f)). Estimating the amount: list the costs of a typical election (returning officer's fee as fixed for the society's category, printing of voter lists and ballots, notices, hall, videography if used) and spread them over the five-year term. Synthetic example: 60 members; estimated election cost ₹60,000 every five years. Per member ₹1,000 over 60 months, about ₹17 a month; or ₹200 a year. Left-over money carries forward for the next election. If the fund is persistently larger than needed, the general body can lower the rate. Using it for anything else needs a general-body decision and, under the draft bye-laws, is outside its stated purpose (dBL 19 opening words). Associate or provisional members are not separate contributors; the contribution follows membership.

Question 10

All our fixed deposits are in one co-operative bank. What if that bank fails? How much is protected?

Accepted Answer

Deposit insurance by DICGC covers up to ₹5 lakh per depositor per bank, including co-operative banks, and a society is a single depositor at each bank. Anything above that is at risk if the bank fails. Spread deposits across several eligible banks and check each bank's audit class and health. Deposit insurance: the Deposit Insurance and Credit Guarantee Corporation insures deposits in commercial banks and in co-operative banks up to ₹5,00,000 per depositor per bank, counting all the depositor's accounts in the same capacity at that bank together (principal and interest). A housing society is one depositor; its FDs for different funds at the same bank are added up. Synthetic example: sinking fund FDs ₹32 lakh, repair fund ₹8 lakh and current account ₹3 lakh, all at one bank = ₹43 lakh. If the bank failed, about ₹5 lakh would be insured; the rest would depend on the bank's revival or liquidation. What the MCS law allows: investment only in the s.70 modes; the 2014 bye-laws already required the bank account to be in a State or District Central Co-operative Bank or a scheduled bank with an "A" audit class for the last three consecutive years, or a nationalised bank (BL 112); the draft 2026 bye-laws repeat the "A" class test for investments (dBL 20(a)(i)). The committee must ensure "safety and security of funds" and liquidity (dBL 20(h)). Practical policy for the general body to adopt: a cap per bank (for example not more than a stated share of total funds, or near the insured limit where feasible), a list of eligible banks reviewed yearly, staggered maturities, and a report to the AGM.

Question 11

The bye-laws speak of a bank with an "A" audit class for three consecutive years. How does a committee check that?

Accepted Answer

The test is now in the Act: a housing society must invest its funds in a District Central or State Co-operative Bank with at least an "A" audit class in each of the last three years, or, if no such bank is available in the district, in a nationalised bank (s.154B-17(a)). Ask the bank in writing for its audit class for each of the last three years, check it against its published annual report or audit certificate, minute the check before opening an account or placing an FD, and repeat it every year. Where the test comes from: s.154B-17 of the Act lists the modes in which a housing society may invest or deposit its funds: (a) a District Central or State Co-operative Bank "having awarded at least 'A' Audit Class in last three consecutive years", or, if none is available in the district, any nationalised bank; (b) trustee securities under s.20 of the Indian Trusts Act; (c) shares, bonds or debentures of another society with limited liability; (d) any other mode permitted by the Rules or by a Government order. The 2014 model bye-laws also mentioned a scheduled bank with an "A" class (BL 112); a scheduled private bank is not in s.154B-17 unless a Government order under clause (d) allows it. The draft 2026 bye-laws repeat the statutory test (dBL 20(a)(i)). The audit class is awarded by the statutory auditor on completing the audit (Rule 69(9) of the MCS Rules), and the Registrar's published list of societies shows it (s.12(3)). A simple procedure: 1. Letter to the branch asking for the audit class for, say, 2023-24, 2024-25 and 2025-26, and the auditor's certificate or annual report pages that show it. 2. Check the annual report on the bank's website; note the class and the auditor's name. 3. Record the result in a committee resolution approving the bank, with copies on the investment file. 4. Re-check every year when the new audit class is published; if the class falls, do not renew FDs there on maturity without a fresh decision. Nationalised banks do not receive a co-operative audit class; the Act treats them as the fallback. A bank's RBI supervisory actions are also worth checking before placing large deposits.

Question 12

When does a housing society need an Investment Fluctuation Fund, and how much goes into it?

Accepted Answer

Only when it has invested at least 10 % of its working capital in securities, such as government securities. Bank FDs are deposits, not securities, so most housing societies never cross the line. If it applies, the Registrar may direct a set percentage of net profits to the fund each year. Rule 55(3) of the MCS Rules 1961: every society that has invested not less than 10 % of its working capital in securities must constitute an investment fluctuation fund, and the Registrar may direct that a specified percent of net profits be credited to it every year until it is adequate to cover losses on disposal of the securities. Rule 106C-1 does not exclude Rule 55 for housing societies, and the draft 2026 bye-laws repeat the requirement (dBL 20(f)). Synthetic example: working capital (members' funds, reserves and other long-term sources used in the society) ₹60,00,000. The society holds ₹4,00,000 in Government of India securities (6.7 %) and the rest in bank FDs. No fund is needed. If it buys another ₹3,00,000 of securities, its holding becomes ₹7,00,000 (11.7 %) and the fund is required. Why it matters: the market value of government securities falls when interest rates rise; the fund absorbs a loss if the society must sell before maturity. Provision for the fund is one of the deductions allowed in calculating net profit (Rule 49A(1)(xiii)). Societies that keep only bank FDs should say so in the investment policy, so the auditor does not look for a fund that is not required.

Question 13

Can the society put its sinking fund into government securities, RBI bonds or post-office schemes instead of a bank FD?

Accepted Answer

Government of India and State Government securities are among the trustee securities that s.70 allows. Whether a particular product, such as a post-office scheme or a specific savings bond, qualifies depends on whether it is a notified trustee security or a mode the Government permits. Check that, and take the general body's approval, before investing. Section 70 of the Act lets a society invest in (a) a Central Bank or the State Co-operative Bank, (b) "any of the securities specified in section 20 of the Indian Trusts Act, 1882", (c) shares or bonds of other co-operative societies within limits, (d) a co-operative bank or banking company approved by the Registrar, and (e) any other mode permitted by the Rules or a Government order. The 2014 bye-laws and the draft 2026 bye-laws follow s.70 (BL 15; dBL 20(a)). Section 20 of the Indian Trusts Act covers, among others, securities of the Central and State Governments and other securities the Central Government notifies. Government securities held through RBI Retail Direct or a bank are therefore generally within s.70(b). Points to weigh: - Liquidity: sinking-fund money may be needed for a sudden structural repair; long-dated securities can
  lose value if sold early (see the Investment Fluctuation Fund rule at 10 % of working capital).
- Post-office schemes and particular savings bonds: confirm the notification status before investing,
  and whether an institution such as a co-operative society may hold them at all.
- Mutual funds, equity and company deposits are not s.70 modes (funds_investments-006). - Record every investment in the Investment Register and place details before the AGM (dBL 20(h)). Synthetic example: sinking fund ₹20,00,000. A policy of ₹15,00,000 in staggered bank FDs and ₹5,00,000 in a Government of India security maturing when the next major repair is expected keeps both return and liquidity in view.

Question 14

Is the interest the society earns on its fund FDs taxable, and will the bank deduct TDS?

Accepted Answer

Members' contributions are not income under mutuality, but interest from banks is. Interest from a co-operative bank can be deducted in full under s.149 of the Income-tax Act 2025 (the old s.80P(2)(d)), so it usually ends up untaxed; interest from other banks is taxable. Banks other than co-operatives normally deduct TDS, which the society claims back in its ITR-5. Mutuality covers contributions members make for common purposes. It does not cover interest earned from banks: the Supreme Court held that interest on fixed deposits with member banks is not exempt on mutuality (Bangalore Club, paras 26-28). Deductions: interest or dividends a co-operative society earns from investments with another co-operative society, including a co-operative bank, are deductible (old s.80P(2)(d), now s.149). The ITAT Mumbai has allowed this to a housing society (Charkop Lands End). Interest from nationalised or private banks is taxable, subject to the ₹50,000 general deduction under s.149(2)(c)(ii) where it applies. TDS: interest TDS now falls under s.393 of the 2025 Act (10 %, with thresholds); interest paid by one co-operative society to another has traditionally been outside TDS, while other banks deduct it. Synthetic example: FD interest ₹2,40,000 from a district co-operative bank and ₹60,000 from a nationalised bank. The first is deductible in full; the second is taxable income (less any eligible deduction). If the nationalised bank deducted ₹6,000 TDS, the society claims it in its return. Fund accounting is separate from tax: interest still goes to the fund that earned it (BL 15). File ITR-5 by the due date and keep Form 26AS / AIS reconciled.

Question 15

How much of the year's surplus must go to the reserve fund, and what else automatically goes into it?

Accepted Answer

At least one quarter of net profit each year, unless the Registrar fixes a lower rate (never below one tenth). On top of that, entrance fees, transfer fees and premium, and donations not given for a specific purpose go straight to the reserve fund. A ₹2,00,000 net surplus means at least ₹50,000 to the reserve fund. Section 66(2) of the Act: every society shall carry at least one-fourth of its net profits each year to the reserve fund; the Registrar may, having regard to the financial position, fix a lower rate but not below one-tenth. Rule 49A lists what is deducted from gross profit to arrive at net profit (interest payable, establishment and working expenses, audit fees, depreciation, provisions and so on). The 2014 bye-laws apply 25 % (BL 147(a)). Rule 106C-11(1) says the reserve fund consists of: all entrance fees; all transfer fees, charges or premium on transfers; the share of net profit under s.66; and all donations except those for specific purposes. The 2014 bye-laws required these to be appropriated when finalising the year's accounts (BL 12(b)). Synthetic example for a year: - entrance fees ₹1,500 (three new members at ₹500); - transfer fee ₹1,500 and transfer premium ₹50,000 on three sales; - an unconditional donation ₹10,000; - audited net surplus ₹2,00,000 → 25 % = ₹50,000. Credit to the reserve fund this year: ₹1,13,000. The reserve fund is indivisible (dBL 17(c)). In a housing society it may be used for repairs, maintenance and renewal of the buildings (BL 14(a); Rule 54(3)), but a separately invested reserve fund may be drawn on only with the Registrar's prior written sanction (Rule 54(2)).

Question 16

After the reserve fund share, what may the AGM do with the rest of the year's surplus? Can it be returned to members?

Accepted Answer

Under the 2014 bye-laws the remaining 75 % may pay a dividend on shares (up to 15 %), an honorarium to office-bearers (up to 15 % of net surplus), a common welfare fund, and the balance is carried forward as the AGM decides. Returning cash to members is not among the uses; lowering next year's charges by carrying the surplus forward is the usual route. BL 147(b) directs the remaining 75 % of net profit, subject to Rules 50-53: - dividend on paid-up share capital not exceeding 15 % a year, on the committee's recommendation and the
  AGM's approval (s.67 also caps dividend at 15 % without the Registrar's sanction);
- honorarium to office-bearers not exceeding 15 % of the net surplus, or as the AGM decides; - an allocation to a common welfare fund; - the balance carried forward or dealt with as the AGM decides on the committee's recommendation. Section 69 also allows up to 20 % of net profits, after the reserve and education funds, for co-operative, charitable or public purposes with the approval of the notified federal society. Synthetic example: net surplus ₹2,00,000; reserve fund ₹50,000; share capital ₹30,000 (60 members × ₹500), so a 15 % dividend is only ₹4,500; honorarium up to ₹30,000; welfare fund ₹20,000; balance ₹95,500 carried forward, which the budget can use to hold service charges steady next year. Returning surplus as cash per flat is not provided for and mixes up statutory funds and members' money; a surplus in a fund stays in that fund. The GB resolution on "disposal of surplus" is also part of the annual return (BL 145(b)(iii)).

Question 17

This year expenses exceeded collections and the society ran a deficit. How should it be made good?

Accepted Answer

Not by borrowing from the sinking or repair funds. Show the deficit in the accounts, explain it to the AGM, and have the general body approve a way to recover it: a higher service charge or a one-time supplementary levy shared on the correct basis, or setting it against a carried-forward surplus. Earmarked funds may be used only for their purpose, with general-body approval (BL 14; dBL 19), and using them for running costs is an irregularity (funds_investments-004). So a deficit in the income and expenditure account has to be met from members' contributions or accumulated surplus. Options for the AGM: - Set it against a surplus carried forward from earlier years, if any. - A one-time supplementary levy under the same head that overran. A service-charge deficit is shared
  equally per flat (Rule 106C-12(4) item 1); a lift-cost overrun only by the flats of that building
  (item 4).
- Revise the budget and rates for the coming year so the gap does not recur. - For a genuine repair overrun, a Major Repair Fund levy by carpet area, or the sinking fund for heavy
  repairs, each on a general-body resolution.
Synthetic example: service-charge budget ₹14,40,000; actual ₹15,60,000 (security wages revised mid-year). Deficit ₹1,20,000 over 40 flats = ₹3,000 per flat, billed as "service charges, supplementary 2025-26" after the AGM resolution. Accumulated losses reduce the society's borrowing limit (Rule 106C-10), another reason to clear them.

Question 18

In our redevelopment the developer pays a "corpus" to the society and also a separate amount to each member. Whose money is which?

Accepted Answer

A corpus paid to the society under the development agreement belongs to the society and is used only as the general body decides. Amounts the agreement or individual PAAA pays to each member (hardship compensation, rent, a per-member corpus) belong to that member. The agreement's wording decides which is which, so read it carefully. Society corpus: the Act defines the corpus fund as payment "received or receivable by the society from the developer in lieu of surrendering its development rights of plot by way of registered document or contributed by Members for any purpose as decided in general meeting" (s.154B-1(7)), and says it may be used for the purposes the general meeting decides (s.154B-18, proviso). The Rules allow a society to maintain a corpus fund (Rule 106C-11(8)); the draft 2026 bye-laws repeat the definition and the general-body control (dBL 4(x), 18(g), 19(h)). The 2014 bye-laws list "corpus fund, in case of redevelopment" as a way of raising society funds (BL 7(m)). Member's own payments: many agreements provide for sums payable to each member individually (rent for alternative accommodation, shifting charges, a per-flat amount described as corpus or hardship). If the agreement makes them payable to the member, they are not society funds, and the society cannot keep or redirect them without the member's consent. Synthetic example: agreement provides ₹1.2 crore to the society as corpus and ₹8 lakh to each of 40 members. The ₹1.2 crore goes into the society's corpus fund (invested under s.154B-17, used as the general body decides, for example towards maintenance of the new building). Each member's ₹8 lakh is his. Tax consequences for the society and for members differ and need a chartered accountant's advice.

Question 19

Our society has 60 members. A ₹3.5 lakh repair has come up. Which fund pays, and does the committee need the general body's approval?

Accepted Answer

With 60 members the committee's one-time spending power on repairs is ₹3,00,000 in a financial year, so a ₹3.5 lakh job needs general-body approval, except under the draft bye-laws' emergency provision. Routine repairs come from the repair and maintenance fund; heavy or structural work from the major repair fund or the sinking fund, each on a general-body decision. Spending limits: Rule 106C-13(5)(b) lets the committee spend on repair and maintenance "once in a financial year" up to ₹1,00,000 (up to 25 members), ₹2,00,000 (26-50), ₹3,00,000 (51-100), ₹4,00,000 (101-1,000) and ₹5,00,000 (above 1,000). These replace the 2014 figures of ₹25,000 / ₹50,000 / ₹1,00,000 (BL 156). The draft 2026 bye-laws require general-body approval above the limit except for emergency repairs (dBL 147(e)-(f)), and say repairs are funded from the repair, major repair, sinking or other approved funds (dBL 147(h)). Which fund: - Routine, recurring repairs (plumbing, minor plaster, pump overhaul): repair and maintenance fund
  (Rule 106C-11(3)).
- Significant repair or renovation (waterproofing the terrace, external painting): major repair fund,
  levied by carpet area as the general body decides (Rule 106C-11(4)).
- Heavy structural repairs: sinking fund, as approved by the general body (Rule 106C-11(2)); under the
  2014 bye-laws also on the architect's opinion or certificate (BL 14(c)).
Synthetic example: 60 members; terrace waterproofing quoted at ₹3,50,000 after three quotations. Above ₹3,00,000, so call an SGM on five clear days' notice (Rule 106C-13(3)(h)); resolution approving the work, the contractor and funding from the major repair fund (or the repair fund balance if sufficient). If a leak is damaging flats, the draft's emergency provision may allow immediate work with ratification.

Question 20

We have an old "building fund" and a "festival fund" with small balances. Can the general body close them and move the money to another fund?

Accepted Answer

Non-statutory funds can be closed by a general-body resolution, with the balance moved to a fund whose purpose fits. Statutory funds the Rules require (reserve, sinking, repair and maintenance, major repair, election) cannot be abolished, and voluntary welfare contributions should stay with welfare purposes. What the texts say: - Rule 106C-11 lists funds the society "shall" establish (reserve, sinking, repair and maintenance,
  major repair, election) and funds it "may" keep (education and training, welfare, corpus, and any
  other fund approved by the general body with equal contributions).
- The 2014 bye-laws allow use of any fund only with the general body's prior approval (BL 14). - The draft 2026 bye-laws: "No fund of the Society shall be utilised for any purpose other than that
  for which it is created, except with the approval of the General Body and in accordance with the
  provisions of the Act and Rules" (dBL 19).
A clean procedure for closing an optional fund: 1. Committee note giving the fund's origin, balance and investments, and a proposed destination. 2. AGM or SGM resolution to close the fund and transfer the balance, naming the receiving fund. 3. Journal entry and investment-register update; show the transfer in the next accounts. Synthetic example: an old "building fund" of ₹1,80,000 collected for construction-related costs is moved to the major repair fund; a "festival fund" of ₹22,000 collected voluntarily is moved to the welfare fund, whose purpose (social and cultural activities) matches. Moving voluntary money into a compulsory fund, or statutory fund money into general income, invites objection. Note that "building fund" also appears in the borrowing-limit formula (Rule 106C-10); closing it may reduce that limit slightly.

Question 21

A member wants to donate money to the society. And can the society ask a buyer for a "donation" before admitting him?

Accepted Answer

A genuine voluntary donation can be accepted; unless given for a specific purpose, it goes to the reserve fund. But a donation can never be demanded as a condition of admission, transfer or any permission. The 2014 bye-laws also bar donations from the transferor and transferee, and the transfer premium has a fixed cap that cannot be topped up by another name. Where donations go: the reserve fund includes "all donations received by the society, except those designated for specific purposes" (Rule 106C-11(1)(d); BL 12(a)(v)). A donation earmarked in writing for, say, a garden or CCTV goes to that purpose and should be accounted for separately. Limits: - The 2014 bye-laws allow funds to be raised "by voluntary donations, (but not from Transferor and
  Transferee)" (BL 7(e)).
- The draft 2026 bye-laws say donations shall not be collected as a condition for admission of a member,
  transfer of shares and interest, or grant of any permission, NOC, approval or consent; they must be
  voluntary, without coercion, and recorded in the books (dBL 12(vi)).
- The transfer premium is capped by the s.79A order of 9 Aug 2001 (₹25,000 in municipal corporation
  areas, ₹10,000 in municipal councils, ₹5,000 elsewhere), and no other amount may be charged under any
  name on transfer.
Synthetic example: a retiring member gives ₹50,000 by letter "for general purposes" (reserve fund). Another gives ₹30,000 "for solar panels" (earmarked; spend only on that, on a general-body decision). A buyer asked for a ₹1,00,000 "donation" to be admitted can refuse, and complain to the Registrar; excess premium is a Registrar matter (dBL 190(A)(vi)). Issue a receipt describing the payment as a donation and its purpose.

Question 22

Transfer premiums have built up a large reserve fund. Can we use it to reduce everyone's monthly maintenance?

Accepted Answer

Not as a regular subsidy. The reserve fund is indivisible and, in a housing society, meant for repairs, maintenance and renewal of the buildings; a separately invested reserve fund can be drawn on only with the Registrar's prior written sanction. Paying for building repairs from it can indirectly ease the bills, but only on a general-body decision and within those limits. Composition: the reserve fund holds entrance fees, transfer fees and premium, the s.66 share of profit and undesignated donations (Rule 106C-11(1)). Use: s.66(2) lets the reserve fund be used in the society's business or invested, or with Government sanction used partly for public purposes. For housing societies, Rule 54(3) allows its use "for expenditure on the maintenance, repair and renewal of buildings of the society" (co-partnership housing), and the 2014 bye-laws say the same (BL 14(a)). Rule 54(2) bars drawing on a separately invested reserve fund without the Registrar's prior written sanction. The draft 2026 bye-laws call the fund "indivisible" and restate these limits (dBL 17(c), 19(a), 20(b)). What that allows: funding an approved building repair or renewal, after a general-body resolution and, if the fund is separately invested, the Registrar's sanction. What it does not allow: meeting service charges such as staff salaries or common electricity, which is what a monthly "maintenance reduction" would amount to. Synthetic example: reserve fund ₹12,00,000. The AGM approves repainting the stairwells for ₹4,00,000 from it (with sanction if needed); that ₹4,00,000 does not have to be levied through the major repair fund, so members benefit. Cutting each flat's service charge by ₹500 a month funded from the reserve fund would not fit the permitted uses.

Question 23

Can the treasurer alone operate the society's bank account, net banking or FDs, or hold the FD receipts personally?

Accepted Answer

No. The account is operated jointly: the Secretary with the Chairman or the Treasurer under the 2014 bye-laws, and by the persons the committee authorises jointly under the draft 2026 bye-laws. For net banking, set up a maker-checker arrangement so every payment needs two authorised people. FDs stay in the society's name and their receipts in the society's custody. - 2014 bye-laws: the account "shall be operated upon and all acquaintances and discharges shall be
  signed by the Secretary jointly with the Chairman or Treasurer" (BL 112). Payments above ₹1,500 are to
  be made by crossed account-payee cheque (BL 144) and cash in hand is limited (BL 143).
- Draft 2026 bye-laws: the account is operated jointly by the Secretary with the Chairman or Treasurer,
  or other office-bearers the committee authorises, and "all receipts, payments, withdrawals, cheques,
  electronic transactions, acknowledgements and discharges" are jointly signed or authorised (dBL
  108(b)). The committee is responsible for safe custody of funds (dBL 108(e)).
Practical controls: - Net banking with one "maker" (for example the manager or treasurer) and a second "checker" (Secretary
  or Chairman); no single-user full access.
- FDs in the society's name only; renewals and premature closures on a committee resolution, with two
  signatures.
- FD receipts or e-receipts kept in the society's office or with the bank, recorded in the Investment
  Register, never held personally at home.
- Change of signatories after an election by committee resolution sent to the bank at once. Synthetic example: the treasurer alone moves ₹2,00,000 from a sinking-fund FD to the current account to pay a contractor. Even if the payment is genuine, the transaction breaches joint operation and fund rules; the auditor will report it, and committee members are jointly responsible for losses.

Question 24

Can you show how a society's borrowing limit is calculated, for a repair loan and for self-redevelopment?

Accepted Answer

Ordinary limit: ten times (paid-up share capital + reserve fund + members' contributions towards land and building + building fund − accumulated losses). Self-redevelopment: up to ten times the land value certified by a Government-approved valuer. A society with ₹25,000 capital and a ₹3,00,000 reserve fund and no losses can owe up to ₹32,50,000. Rule 106C-10: no housing society shall incur liability exceeding ten times the total of its paid-up share capital, accumulated reserve fund, amount contributed by members towards land and building, and the building fund, minus accumulated losses. For self-redevelopment and self-development it may borrow up to ten times the value of the land per a Government-approved valuer's report. The draft 2026 bye-laws repeat this and add that all borrowings go to the general body for approval (dBL 16(i)-(iii)). Synthetic example 1 (repair loan): - paid-up share capital ₹25,000 (50 members × ₹500); - reserve fund ₹3,00,000; - members' contributions towards land and building recorded in the society's books: nil; - building fund: nil; accumulated losses: nil. Base ₹3,25,000 × 10 = ₹32,50,000. If the society already owes ₹2,00,000 (for example members' deposits), it can take a further loan of up to ₹30,50,000. With accumulated losses of ₹50,000, the base falls to ₹2,75,000 and the limit to ₹27,50,000. Synthetic example 2 (self-redevelopment): a valuer's report puts the land at ₹18 crore; borrowing up to ₹180 crore is allowed by the Rule, subject to general-body approval, lenders' own norms and s.79A directions. "Liability" includes deposits taken from members as well as loans (BL 11; dBL 16). Loan instalments and interest are recovered from members at the amount fixed by the lender (Rule 106C-12(4) item 7).

Question 25

The committee has added a "welfare fund" for festivals to everyone's bill. Is that compulsory?

Accepted Answer

No. From 22 Jun 2026 the welfare fund may consist only of voluntary contributions from members. It is used for social, cultural and recreational activities the society organises. It cannot be billed as a compulsory charge. A different, compulsory special-purpose fund would need a general-body resolution and equal contributions, and cannot be used to force payment for festivals. Rule 106C-11(7): "The Society may establish Welfare Fund which may consist of voluntary contributions collected from its members. The welfare fund may be used for social, cultural and recreational activities organized by the society." Item 11(vi) of the apportionment table in Rule 106C-12(4) repeats: "Voluntarily by members". The draft 2026 bye-laws say the same, and add that the fund is used for activities the general body approves. Rule 106C-11(9) allows other funds for specific purposes, with contributions collected equally from all members, subject to general-body approval. Using that route to make festival spending compulsory would defeat the voluntary rule for welfare activities. A member could challenge it before the Co-operative Court as a dispute about excess charging (dBL 190(B)(ix)). What the society should do: - show any welfare contribution as a separate, optional line or a separate appeal; - never add interest or recovery action to it; - account for it separately and report its use to the general body. See also maintenance_charges-008 on adding new heads.

Question 26

Can the society donate money to a charity, a relief fund or a local festival from its funds?

Accepted Answer

Only within narrow limits. The Act lets a society set aside up to 20 % of its net profits, after the reserve and education funds, for co-operative, charitable or public purposes, with the approval of the notified federal society. Members' maintenance contributions and statutory funds are not available for donations. Voluntary giving belongs in a voluntary welfare fund. Section 69: after providing for the reserve fund (s.66) and educational funds (s.68), a society "may set aside a sum not exceeding twenty per cent of its net profits". With the approval of the federal society the Government notifies, it may use that sum for any co-operative purpose, any charitable purpose under the Charitable Endowments Act 1890, or any other public purpose. A housing society collects maintenance from members for common expenses. Any year-end surplus is not ordinary business profit, and the earmarked funds (sinking, repair, major repair, election) may be used only for their purposes with general-body approval (BL 14; Rule 106C-11). Spending society money on a donation without these conditions is a misapplication the auditor can report, and it can lead to liability under s.88 (see committee-108). The welfare fund, made up of members' voluntary contributions, can pay for social, cultural and recreational activities (Rule 106C-11(7); see funds_investments-101). For a relief appeal, collect voluntary contributions and account for them separately.

Question 27

What are the practical steps to invest the society's surplus funds?

Accepted Answer

Invest only in the modes s.70 of the Act allows, such as a district central or state co-operative bank, trustee securities, or a co-operative or other bank approved by the Registrar. Get the general body's approval for the policy, pass a committee resolution for each deposit, keep FDs in the society's name, and enter each one in the investment register. BL 15 says funds not in use may be invested as s.70 requires, and that fund collections are invested long term together with the interest earned on them. BL 14 requires the general body's prior approval for using all funds. Failing to invest funds as s.70 requires is an offence (s.146(c)). The draft 2026 bye-laws also cite s.154B-17 (dBL 108(d)). Steps: 1. General-body resolution adopting an investment policy: permitted banks, the split between
   funds, maximum per bank, and maturity ladder.
2. Committee resolution for each deposit naming the fund (sinking, repair, reserve and so on),
   the bank, the amount, the tenure and the signatories.
3. FD in the society's name only, never an office-bearer's; interest to be reinvested in the
   same fund (see funds_investments-011).
4. Investment register entry: fund, bank, FD number, amount, rate, dates, maturity amount. 5. Keep the original receipt in safe custody; a copy goes in the file. Mutual funds, company deposits and shares are not listed in s.70. Before using a private bank or a small-finance bank, check it is a mode the Registrar or Government has permitted (see funds_investments-006).

Question 28

How should fixed deposits be tracked and renewed?

Accepted Answer

Keep an investment register and a maturity diary. About 30 days before each maturity, put the renewal before the committee. Renew into the same fund, in the society's name, with the interest added so the fund keeps its earnings. Record the new receipt and file the old one marked "renewed". The Investment Register is a statutory register (BL 140(8)). BL 15 says fund money is invested long term along with the interest earned on it, so interest on a sinking-fund FD belongs to the sinking fund, not to general income (see funds_investments-011). A 30-day maturity reminder is society policy (the regime profile sets it for the console). At renewal: - compare rates across permitted banks (funds_investments-201); - avoid auto-renewal into a different tenure or type without a decision; - make sure no FD is pledged or liened without a resolution; - check that TDS on interest is claimed or that the exemption form is filed with the bank,
  as the CA advises (interest from a co-operative bank may be deductible, see tax_gst-005).
At year end, the auditor matches the register to the bank's balance confirmations and interest certificates. Keep them in the audit file.

Question 29

How is the sinking fund calculated, and can the society charge more than the minimum?

Accepted Answer

At a rate the general body fixes, but not less than 0.25 % a year of the construction cost of each flat as certified by the architect (excluding land). The general body may fix a higher rate; the committee alone cannot. The sinking fund is compulsory. The 2014 bye-laws set the minimum at 0.25 % a year of the construction cost of each flat incurred when the building was built, certified by the architect and excluding the proportionate land cost (BL 13(c)); the June 2026 Rules repeat the 0.25 % minimum (Rule 106C-11(2); 106C-12(4) item 11(i)). It is the original construction cost, not today's market value or replacement cost. If the architect's certificate is missing, the general body usually adopts a figure on a fresh architect's certificate — record that resolution. Any rate above the minimum is a general-body decision and can be revised by it. The collection must be shown as a separate fund with its own register (Sinking Fund Register, BL 140) and invested (funds_investments-006). Sinking fund contributions are taxable under GST where the society is registered (see tax_gst).

Question 30

What can the sinking fund be spent on? Can we use it for painting or routine repairs?

Accepted Answer

Only for reconstruction, structural strengthening or heavy repairs certified by the society's architect, and only on a general-body resolution. Routine repairs and ordinary painting belong to the Repair and Maintenance Fund. BL 14(c) allows the sinking fund to be used, on a general-body resolution, for reconstruction of the building, for structural additions or alterations the architect thinks necessary to strengthen it, or for heavy repairs certified by the architect and approved by the general body; all fund utilisation needs the general body's specific prior approval (BL 14, last para). The June 2026 Rules say it "shall be used for heavy repairs, as approved by the general body" (Rule 106C-11(2)); the draft 2026 bye-laws allow structural repairs, replacement of major components or assets and reconstruction, with no withdrawal without prior GB approval (dBL 18(a), 19(b)). So: repairs recommended in a structural audit report — yes, with GB approval. External painting is usually routine maintenance; it qualifies only where it is part of certified structural or waterproofing work. Whether a particular job is "heavy repair" is decided on the architect's certificate, not by the committee.

Question 31

How is the repair and maintenance fund charged — per flat, per square foot, or on construction cost?

Accepted Answer

At a rate fixed by the general body, not less than 0.75 % a year of the architect-certified construction cost of each flat. It pays for normal recurring repairs. Big one-off jobs are funded through a separate Major Repair Fund on carpet area. BL 13(a) and 66(a)(iii) set the Repairs and Maintenance Fund at a GB-fixed rate with a minimum of 0.75 % a year of each flat's construction cost, for normal recurring repairs. Rule 106C-11(3) and 106C-12(4) item 11(ii) (June 2026) keep the 0.75 % minimum. Because it is tied to each flat's cost, a bigger flat usually pays more; that is lawful for this head. By contrast, service charges (staff, security, common electricity, office costs, audit fees) must be divided equally per flat (BL 66(a)(vi); Rule 106C-12(4) item 1) — charging those by area is a common complaint and is not permitted. The committee may spend from this fund in the ordinary course, within its spending limit (dBL 19(c); see repairs_structure-009).

Question 32

Can the committee use money from the sinking or repair fund to meet a shortfall in day-to-day expenses or pay legal fees?

Accepted Answer

No. Each fund may be used only for the purpose for which it was created, and any use needs the general body's prior approval. Borrowing from an earmarked fund to cover running expenses is an irregularity auditors report. Under the 2014 bye-laws every fund is used for its stated purpose and "utilisation of all the Funds shall be with the specific prior approval of Society's General Body" (BL 14). The 2014 annexure lists "misappropriation / misapplication of the funds" and "investment of funds without prior permission of G.B.M." among matters for the Registrar. The draft 2026 bye-laws say no fund may be used for any purpose other than the one for which it was created except with GB approval and in accordance with the Act and Rules (dBL 19, citing s.154B-18 and s.67); the election fund is for elections only, the sinking and major repair funds need prior GB approval. Legal costs of proceedings against an officer in his personal capacity cannot be paid from society funds at all (s.71-A). A shortfall in running expenses should be met by revising service charges at the general body and by recovering arrears, not by dipping into the sinking fund. Members who find such transfers can raise them at the AGM when the audit report is considered, and complain to the Registrar.

Question 33

When I sell my flat, do I get back my share of the sinking fund or repair fund?

Accepted Answer

No. Fund contributions belong to the society, not to individual members, and the bye-laws make no provision for refunding them on sale. The buyer steps into the membership and the fund stays with the building. The funds are created by the society out of members' contributions for the upkeep of the society's property (BL 13-14; Rule 106C-11). On transfer, the outgoing member receives only what the transfer bye-laws provide — the transferee takes over the shares and interest in the property (BL 38; dBL 25–27) — and nothing in the bye-laws allows a member to withdraw his contributions to the sinking, repair or major repair funds. How the seller and buyer share that value is a matter for their sale price. The same applies to the corpus fund received from a builder or developer (funds_investments-009).

Question 34

Where can a housing society invest its surplus funds — private banks, mutual funds, company deposits?

Accepted Answer

Only in the modes listed in section 70 of the Act: the District Central or State Co-operative Bank, trustee securities (Government securities under s.20 of the Indian Trusts Act), shares or bonds of other co-operative societies, a co-operative bank or bank approved by the Registrar, or a mode the Government permits. Mutual funds, equity and company deposits are not permitted modes. Section 70 lists the permitted modes: (a) a Central (district) or the State Co-operative Bank; (b) securities under s.20 of the Indian Trusts Act 1882; (c) shares, security bonds or debentures of another society with limited liability; (d) another co-operative bank or banking company approved by the Registrar, on his conditions; (e) any other mode permitted by the Rules or a Government order. Rule 55 applies these modes to funds other than the reserve fund. BL 15 adds that collections are to be invested long-term together with the interest earned on them. The draft 2026 bye-laws tighten this for housing societies: a District Central or State Co-operative Bank with at least "A" audit class in each of the last three years, and a nationalised bank where no such bank is available (dBL 20(a)(i), citing s.154B-17). Investing in any other mode, or without the general body's prior permission, is an irregularity under the 2014 annexure. Nationalised-bank deposits are commonly used; check that they fall within a Registrar approval or Government order under s.70(d)-(e), or the 2026 bye-law once adopted. Interest from co-operative banks is fully deductible for income tax; interest from other banks is taxable (see tax_gst).

Question 35

Who decides where the society's fixed deposits are placed — the treasurer, the committee or the general body?

Accepted Answer

The general body. The 2014 bye-laws treat investing funds without the general body's prior permission as an irregularity; the committee executes the investment within the modes and limits the general body approved, and the details go to every AGM. BL 14 requires specific prior GB approval for utilisation of all funds and the 2014 annexure names "investment of funds without prior permission of G.B.M." as a Registrar matter; the regime profile records GB permission as required. Under the draft 2026 bye-laws the committee must ensure the investment complies with the Act, keeps funds safe and liquid, records it in the books and places details before the AGM (dBL 20(h)); the Register of Investments is a statutory register (BL 140 item 8; dBL 140). A good practice resolution: the AGM approves the investment policy (eligible banks, maximum per bank, tenure, which funds) and authorises the committee to renew within it. The bank account itself is operated jointly by the Secretary with the Chairman or Treasurer (BL 112).

Question 36

What is the reserve fund, where does its money come from, and can it be used for repairs?

Accepted Answer

The reserve fund holds entrance fees, transfer fees and premium, undesignated donations and 25 % of any surplus. In a housing society it may be used for repairs, maintenance and renewal of the society's buildings; drawing on a separately invested reserve fund otherwise needs the Registrar's prior sanction. Rule 106C-11(1) (June 2026) lists the reserve fund's sources: entrance fees, transfer fees, charges or premium on transfers, the share of net surplus under s.66, and donations not given for a specific purpose. BL 147(a) and Rule 49A put 25 % of net profit into it. The 2014 bye-laws allow its use for repairs, maintenance and renewals of the society's property (BL 14(a)); Rule 54(3) similarly allows a co-partnership housing society to use it for maintenance, repair and renewal of buildings. Otherwise a reserve fund that has been separately invested cannot be drawn on, pledged or used without the Registrar's prior written sanction (Rule 54(2); dBL 19(a), 20(b)).

Question 37

The builder or redevelopment developer gave the society a corpus fund. Can it be distributed among members or used to cut monthly maintenance?

Accepted Answer

The corpus fund is the society's money and is used only for purposes the general body decides. Nothing in the Rules provides for sharing it out to individual members; using its interest to subsidise maintenance is a general-body choice that should be recorded by resolution. The 2014 bye-laws list a corpus fund from the promoter builder, and in redevelopment a corpus fund, among the society's ways of raising funds (BL 7(i),(m)). The June 2026 Rules let a society maintain a corpus fund (Rule 106C-11(8)); the draft 2026 bye-laws define it as money received from the developer in lieu of surrendering development rights, or contributed by members as the general meeting decides, and allow its use only for purposes decided by the general body (dBL 4(x), 18(g), 19(h)). Amounts a developer pays to individual members under their own permanent alternate accommodation agreements (rent, shifting, hardship compensation) are different — they are the member's, not the society's. Tax treatment of corpus and of interest on it depends on the facts; consult a chartered accountant.

Question 38

Which funds must every society have after the June 2026 rules, and which are optional?

Accepted Answer

Compulsory: reserve fund, sinking fund, repair and maintenance fund, major repair fund (as needed) and an election fund. Optional: education and training fund, welfare fund (voluntary), corpus fund and any other fund the general body approves. Each must be kept as a separate head in the accounts. Rule 106C-11 says the society "shall establish" the reserve (1), sinking (2), repair and maintenance (3), major repair (4) and election (6) funds, and "may" establish education and training (5), welfare (7), corpus (8) and other GB-approved funds (9), the last collected equally from all members. Rule 106C-7 separately expects co-operative education and training for members and office-bearers, and 106C-12 sets the education and training contribution at ₹10 per member per month or the Government's rate if higher. The 2014 bye-laws had the reserve, repair and maintenance, major repairs, sinking and education and training funds (BL 12-13). The election fund is collected equally from members and used only for committee elections (Rule 106C-11(6); dBL 19(f)).

Question 39

Does the interest earned on the sinking fund fixed deposit belong to the sinking fund or go into general income?

Accepted Answer

Under the 2014 bye-laws fund collections are invested long-term "along with the interest earned thereon", so the interest is added back to the fund that earned it, not used to meet running expenses. BL 15 requires the society's fund collections to be invested on a long-term basis together with the interest earned, by one of the s.70 modes; the regime profile records interest as credited to the fund. The draft 2026 bye-laws require each fund to be "separately accounted for" (dBL 18). In the books, interest on earmarked investments is transferred to the respective fund rather than left in the income and expenditure account; auditors comment when this is not done. Income-tax treatment of that interest is a separate question (see tax_gst).

Question 40

How much can a society borrow, for example for major repairs or self-redevelopment?

Accepted Answer

Up to ten times its paid-up share capital, reserve fund, members' contributions towards land and building and building fund, less accumulated losses. For self-redevelopment it may borrow up to ten times the land value certified by a Government-approved valuer. Borrowing needs general-body approval. Rule 106C-10 (June 2026) fixes both limits. The first general meeting fixes the initial borrowing limit (BL 87(a)(v)); later borrowing and the security for it are general-body matters, and the draft 2026 bye-laws require GB approval of all borrowing in self-redevelopment, with separate books and bank account (dBL 158). Loan instalments and interest are recovered from members as fixed by the lender (Rule 106C-12(4) item 7).

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