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I NCOME TAX. NPO T AXATION 12A Receipts > 1.5 lakh Required No tax on Income 80G / 35AC Raising Funds? Optional Tax deduction for donors TDS Large Payments?

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Presentation on theme: "I NCOME TAX. NPO T AXATION 12A Receipts > 1.5 lakh Required No tax on Income 80G / 35AC Raising Funds? Optional Tax deduction for donors TDS Large Payments?"— Presentation transcript:

1 I NCOME TAX

2 NPO T AXATION 12A Receipts > 1.5 lakh Required No tax on Income 80G / 35AC Raising Funds? Optional Tax deduction for donors TDS Large Payments? Compulsory Deduct & Deposit Tax 2

3 PAN / TAN  Permanent Account Number (PAN)  Form 49A Form 49A  Apply before filing return 7-10 days Tax Deduction Account Number (TAN)  Form 49B49B  Apply when deducting Tax 3

4 12A E XEMPTION C ONDITIONS  Charitable activities  Minimum spending 85%  Arm ’ s length transactions with key persons  Keeping funds in approved modes  Filing tax return annually 4

5 U NSPENT F UNDS ? Indefinite Accumulation Upto 15% Use up next year Carry forward Letter Temporary under-spending Accumulate up to five years Form 10; Board Resolution Long Term Project 5

6 K EY P ERSON P AYMENTS Key Persons? Managers, Trustees, Board Members, Large donors Related parties Payments? Salary, etc. Use / sale / purchase of property Care? Identified and approved Disclosed – form 10Bform 10B Reasonable Implications Loss of Tax Exemption 6

7 A NNUAL T AX R ETURN Due Date 30 th September Penalty Rs. 100 per day Enclosures Audited Consolidated Accounts Form 10B with annexureForm 10B TDS Certificates Carry forward letter etc. Form? ITR 7 7

8 N EW ITR 7 Revised Form ITR 7 Information Sought Sec. 2(15) Objects of general public utility? Business Activities? Business Turnover? FCRA Registration? Amount Received? 8

9 A UDIT R EPORT Form 10B Prepared by Auditor Shows Amount Spent (incl. fixed assets) Set apart Carried forward Payments to key persons 9

10 D ONATIONS

11 80G A PPROVAL Donor’s Benefit 50% deduction from taxable income ValidityLifelong Form10G Documents needed 12A registration Trust Deed / Bylaws Audited Accounts (up to 3 yrs.) Activity Report (up to 3 yrs.) Cash Donations No deduction to donor above Rs. 10,000 11

12 35AC A PPROVAL Donor’s Benefit 100% deduction from taxable income Validity 3-5 years For specific project only Formalities Apply to National Committee (Form)Form Issue certificate to donors (58A)58A Documents needed 12A registration Trust Deed / Bylaws Audited Accounts (up to 3 yrs.) Activity Report (up to 3 yrs.) Project Proposal Project Budget 12

13 A NONYMOUS DONATIONS ProblemDonors w/o name and address Section115BBC Applies toWholly Charitable Organisations RestrictionHigher of 1 lakh or 5% of donations ImpactPay 30% on excess Solution Encourage cheque donations Record donor’s name and address 13

14 S PECIAL I SSUES

15 B USINESS -L IKE A CTIVITIES 15

16 T HE C HARITABLE T RUNK 16 Donor Incentives I Tax Exemption 35AC 80G 12A 10(23)(c) Charitable Purpose

17 S EC. 2(15) Charitable Purpose Conventional Relief of the Poor Education Medical Relief ModernEnvironment Monuments / Culture Dynamic Other useful purpose Business ≤25 lakh 17

18 D EALING WITH 2(15)  Ensure business is  Incidental  Gross revenue ≤ 25 lakh  If not, spin off as a separate organisation  Form of organisation?  For-profit forms  NPO w/o tax exemption 18

19 I NCIDENTAL B USINESS  Incidental?  Only activities connected with main objects  Gross Business Turnover  Any amount for first five categories  ≤ 25 Lakh for Sixth Category 19

20 B USINESS : A CCOUNTING / A UDIT  Separate books of account – sec. 11(4A)  Attach Audited P&L A/c  Transfer profit to main I&E A/c  Form 3CD audit report if Form 3CD  Fees Turnover > 25 lakh  Sale Turnover > 1 crore 20

21 F URTHER R EADING  Accountable 15 : Basics of Tax Registration Accountable 15 : Basics of Tax Registration  Accountable 16 : Income Tax Return Accountable 16 : Income Tax Return  Accountable 91 : Income Tax Exemption Accountable 91 : Income Tax Exemption  Accountable 141 : Charitable purpose and Income Tax Accountable 141 : Charitable purpose and Income Tax  Auditable 2 : Charitable Purpose - 1 Auditable 2 : Charitable Purpose - 1  Auditable 3 : Charitable Purpose - 2 Auditable 3 : Charitable Purpose - 2  Accountable 142 :Eleventh Commandment Accountable 142 :Eleventh Commandment  Accountable 143 : Taxation Tricks and Traps Accountable 143 : Taxation Tricks and Traps  Auditable 12 : Taxing NGO Programs Outside India Auditable 12 : Taxing NGO Programs Outside India 21


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