Monthly charge collection by society

Under what law does a society collect monthly charge from the residents? Can the colony be divided into wards and money collected in cash? What are the basic services that a society should provide to its residents? The collection of money as subscription should be covered under audit and income tax laws. Is that the case? Can the society collect money under different heads by different means and give selective service under each head? Is Society registration mandatory under the Indian law? If a society is charging Rs 2000-3000 per month and collecting same by different people then who is accountable? Are there any basic services which are covered under the society law that the society of flats has to provide in lieu of the monthly subscription it is charging? Is it not illegal to collect cash for garbage disposal and security instead of maintaining a white account?

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3 Answer(s)

Dear Shipraa Sharma,

Firstly, be informed that registration of flat owners association is very much normal and does not require much emphasis as shown by you. It can be done under societies registration Act. Basically you collect cash to share the expenditure and save balance sum for major future expenses. Audit and income tax laws apply where the income is beyond the prescribed limit which is not the case here. Also, registeration of the society is not mandatory. 

Here an association is formed with president, secretary, treasurer etc who are the office-bearer of the association and will be made accountable in case of misappropriation. The chances of misappropriation is rare for the reason that much funds are not involved. 

With regard to management of funds, open a seperate account in the name of the association with authorised signatories and deposit all the monies collected from the flat owners. The sum can be used for any purpose relating to the flat subject to approval of majority of the members. The balance remains with the bank which can be used for major expenses in the future such as painting of the builing, motor, etc.

Hope this helps.


Answered on February 14, 2017.
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The law that Societies must be registered in India is the Societies Registration Act. Once registered the society will function like a company with a head and will have obligations towards its members. Once maintenance is received the society must ensure maximum utilisation of those funds. For example, in an apartment society maintenance of elevators painting of walls and other amenities must be provided. The in charge of this fund will be the president of the society and he or the treasurer must be accountable in case of mismanagement of funds.

Lastly accounts must be maintained by the society and they are subjected to income tax laws and audits.

Answered on February 19, 2017.
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Yes, ma'am it is always better to get it registered as it later prevents legal hassles.

Answered on February 26, 2017.
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