Producer companies and FPOs

The farmer-collective structure, its governance, and why its tax holiday has gone

A producer company is the usual vehicle for a Farmer Producer Organisation (FPO): a body corporate under the Companies Act (Chapter XXIA) owned only by producers or producer institutions, with one-member-one-vote governance (a co-operative principle) and patronage-based returns, and it is the form NABARD and SFAC prefer for grants and credit support. But its tax advantage has gone: the Section 80PA 100% deduction expired after assessment year 2024-25, so for 2026-27 a producer company is taxed like any ordinary domestic company (25/30%, or 22% under 115BAA). The co-operative-society deduction under Section 80P, by contrast, survives. So for tax efficiency alone, a co-operative can now be the better structure for a farmer collective, and the choice turns on governance and grant access rather than a tax holiday.

Last reviewed: 29 May 2026

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What a producer company is

A producer company is governed by Chapter XXIA of the Companies Act 2013 and treated broadly as a private company, but owned only by primary producers (or producer institutions), formed by at least 10 individual producers or 2 producer institutions. It exists to aggregate, process, market and export its members' primary produce (agriculture and allied activities, handloom, handicraft and similar). Governance follows the co-operative principle of one member, one vote (not by shareholding), with limited returns on capital and patronage bonuses linked to how much produce a member routes through it, and mandatory annual reserves. It is the preferred vehicle for NABARD and SFAC-promoted FPOs, which bring equity grants and credit support.

The 80PA tax holiday has expired

For income tax, a producer company is simply a company, taxed at the ordinary domestic rates with no co-operative-style concession by default. It once had the Section 80PA deduction, 100% of profits from eligible member-produce business where turnover was under Rs 100 crore, but that incentive applied only up to assessment year 2024-25 and has not been extended, so it is not available for 2026-27. A producer company therefore now pays tax like any private limited company: 25% (turnover up to Rs 400 crore) or 30%, or the concessional 22% under Section 115BAA, with MAT and the usual company compliance. Do not present the 80PA holiday as a current benefit, it has expired.

Producer company vs co-operative (the calculus flipped)

Because 80PA has expired while the co-operative-society deduction under Section 80P survives, the tax comparison has flipped: for a farmer collective where tax efficiency is the main driver, a co-operative society (eligible for 80P on marketing members' produce, supplying inputs and processing) can now be more tax-favourable than a producer company, which gets no equivalent deduction. So the choice between the two now turns on non-tax factors: a producer company offers the Companies Act framework, professional governance and the NABARD/SFAC grant and credit ecosystem, while a co-operative offers the surviving 80P relief but heavier registrar oversight. Weigh governance and grant access against the tax relief.

tipFor tax alone, a co-operative (which keeps the Section 80P deduction) can now beat a producer company (whose 80PA holiday has expired). Choose a producer company for its governance and NABARD/SFAC grant access, not for a tax break.

Companion guides

Source / notes

Companies Act 2013 Chapter XXIA (ss.378A-378ZU, producer companies)
Income-tax Act 1961 s.80PA (producer-company deduction, sunset after AY 2024-25)
Income-tax Act 1961 s.80P (co-operative deduction, surviving) (Income-tax Act 2025 s.149)

Frequently asked questions

Does a producer company get a tax holiday?+

Not any more. The Section 80PA deduction (100% of eligible member-produce business profits, turnover under Rs 100 crore) applied only up to assessment year 2024-25 and was not extended, so it is unavailable for 2026-27. A producer company is now taxed like any ordinary domestic company, 25/30% or the concessional 22% under 115BAA, with no producer-specific concession. Older material presenting 80PA as a live five-year holiday is out of date.

Is a producer company or a co-operative better for tax?+

For tax alone, a co-operative can now be better. The co-operative deduction under Section 80P survives, while the producer-company deduction (80PA) has expired, so a farmer collective focused on tax efficiency may prefer a co-operative. The producer company's advantages are now non-tax: the Companies Act governance framework and access to the NABARD and SFAC grant and credit ecosystem for FPOs.

Who can form a producer company?+

At least 10 individual primary producers, or 2 producer institutions, or a combination, all engaged in primary produce (agriculture and allied activities, handloom, handicraft and similar). Shares are held only by producers, with restricted transferability, and governance is one member, one vote regardless of shareholding, with patronage-based returns. It is the form most NABARD and SFAC-backed Farmer Producer Organisations take.

How is a producer company taxed now?+

As an ordinary domestic company: 25% if turnover is up to Rs 400 crore (otherwise 30%), or the concessional 22% under Section 115BAA, plus surcharge and cess, with minimum alternate tax where applicable and dividends taxed in members' hands. There is no producer-company-specific rate or deduction for 2026-27 since 80PA expired. It also carries full Companies Act compliance (audit, ROC filings, board meetings).