1. Charitable Trust & Recent Developments Organized by : ACAE CHARTERED ACCOUNTANTS’ STUDY CIRCLE - EIRC Charitable Trust & Recent Developments Organized by : ACAE CHARTERED ACCOUNTANTS’ STUDY CIRCLE - EIRC Presented By : SURESH KR. KEJRIWAL ON 24 TH MAY, 2016 Go

2. COVERAGE 1. CHARITABLE TRUST : MEANING 2. RECENT TREND/DEVELOPMENT 3. FCRA CONCEPTS AND FCRA AMENDMENT RULES effective from 14 th December, 2015 Next Previous

3. WHAT IS CHARITABLE TRUST/NGO/NPO? BASIC CHARACTERISTICS : 1) No definition of charitable institution/NPO in any of the applicable Act to NGO. 2) However the key characteristic of an NPO includes - 2.1. The object to hold property for charitable/religious purposes 2.1. The object to hold property for charitable/religious purposes 2.2. General Body Members/Governing Body Members have no 2.2. General Body Members/Governing Body Members have no direct / indirect interest direct / indirect interest 2.3. At the time of dissolution, the assets will not be transferred to 2.3. At the time of dissolution, the assets will not be transferred to any of the members or board members but will be handed over any of the members or board members but will be handed over to similar organization registered under Income Tax Act. to similar organization registered under Income Tax Act. Next Previous

4. WHAT IS CHARITABLE TRUST/NGO/NPO? DEFINITION OF CHARITABLE PURPOSE : Now the definition of charitable purpose is different in different acts. A) UNDER INCOME TAX ACT : It includes - relief of the poor, education, yoga, medical relief, It includes - relief of the poor, education, yoga, medical relief, preservation of environment. monuments or places or objects of artistic preservation of environment. monuments or places or objects of artistic or historic interest and advancement of any other object of general or historic interest and advancement of any other object of general public utility. public utility. B) UNDER FOREIGN CONTRIBUTION (REGULATIONS) ACT (FCRA) : They have classified the charitable purpose as – Education, Social, They have classified the charitable purpose as – Education, Social, Cultural, Religious, Economic. Cultural, Religious, Economic. NONE OF THE TERMS ARE DEFINED IN THE RESPECTIVE ACTs. NONE OF THE TERMS ARE DEFINED IN THE RESPECTIVE ACTs. Next Previous

5. WHAT IS CHARITABLE TRUST/NGO/NPO? DEFINITION OF CHARITABLE PURPOSE : C) UNDER SERVICE TAX ACT : This includes a very limited activities This includes a very limited activities (clause 2k of Mega Exemption Notification) under the definition of (clause 2k of Mega Exemption Notification) under the definition of activities in relation to charitable purpose which includes – activities in relation to charitable purpose which includes – public health (towards specified purpose & person,) advancement public health (towards specified purpose & person,) advancement of religious & spirituality, educational program or skill development of religious & spirituality, educational program or skill development [again limited to for a specified person] & preservation of [again limited to for a specified person] & preservation of environment) environment) D) FOR CORPORATE SOCIAL RESPONSIBILITY (CSR) : CSR should be as per Schedule VII as per CSR Rules CSR should be as per Schedule VII as per CSR Rules Next Previous

6. WHAT IS CHARITABLE TRUST/NGO/NPO? OTHER KEY ISSUES RELATING TO NGO : 1) Restriction is on profit distribution & not on earning of surplus 2) Private body / public body 3) Self Governing : No direct control of Government, Donors, Beneficiaries Donors, Beneficiaries 4) Bottom line Approach : Not possible : No Indicators Next Previous

7. LEGAL FRAMEWORK FOR NGO Next Previous NPO STEP-1 STEP-3 STEP-2 FORMATION Societies Public Trust U/s. 8 of Companies Act ENABLING REGISTRATION Income Tax Act Bombay Public Trust Act OPERATIONAL REGISTRATION FCR ACT Other Applicable Registration

8. RECENT DEVELOPMENTS CHANGING APPROACH : Welfare : To service delivery; To Development approach To right based approach; Leading to change in Government approach Leading to change in Government approach Next Previous

9. RECENT DEVELOPMENTS a) As NGOs are self governing, the focus is shifting towards strict compliances and substantial penalties for non-compliance : --- Cancellation under Income Tax Act and FCRA --- Increasing coverage of filing of return under Income Tax Act. --- Heavy penalties for non-filing or delayed filing of FCRA return. Next Previous

10. RECENT DEVELOPMENTS LEGAL FRAME WORK DOES NOT FACILITATE FINANCIAL STABILITY LEGAL FRAME WORK DOES NOT FACILITATE FINANCIAL STABILITY a) Voluntary Contribution – 01/04/1973 a) Voluntary Contribution – 01/04/1973 b) Corpus Donation – 01/04/1989 b) Corpus Donation – 01/04/1989 c) Exempt Income other than Agricultural Income and – 01/04/2015 c) Exempt Income other than Agricultural Income and – 01/04/2015 10 (23C) d) Statutory Accumulation 25% to 15% d) Statutory Accumulation 25% to 15% e) Withdrawal/phased withdrawal of exemption available for fund e) Withdrawal/phased withdrawal of exemption available for fund raising raising f) With effect from 01/04/2015 : withdrawal of exemption circular for Provident Fund Next Previous

11. RECENT DEVELOPMENTS IMPACT OF CHANGES IN SERVICE TAX ACT: IMPACT OF CHANGES IN SERVICE TAX ACT: By excluding only certain activities from the purview By excluding only certain activities from the purview of Service Tax, this is becoming a very key areas for all of Service Tax, this is becoming a very key areas for all the NGOs, e.g. computer training program undertaken at a the NGOs, e.g. computer training program undertaken at a subsidized rate, donors agreement with the feasibility clause, etc. subsidized rate, donors agreement with the feasibility clause, etc. BY MAKING CSR AS A STATUTORY REQUIREMENTS BY MAKING CSR AS A STATUTORY REQUIREMENTS UNDER THE COMPANIES ACT : UNDER THE COMPANIES ACT : This has opened new opportunities of fund for the NGOs as well as This has opened new opportunities of fund for the NGOs as well as new opportunities for professionals in the form of advising new opportunities for professionals in the form of advising formation of proper form of NGO, project designing, implementation formation of proper form of NGO, project designing, implementation & Monitoring. & Monitoring. It also raises various issues on which discussion has already been started for a consensus. ( voluntary contribution /restricted ) started for a consensus. ( voluntary contribution /restricted ) Next Previous

12. FCRA COMPLIANCE DULY INCORPORATING FCRA AMENDMENT RULES, 2015 FCRA COMPLIANCE DULY INCORPORATING FCRA AMENDMENT RULES, 2015 Go

13. Next Previous FOREIGN CONTRIBUTION REGULATION ACT, 2010 FCRA, 1976FCRA, 2010 OBJECTIVE Regulate the acceptance & utilisation of foreign contribution in a manner consistent with the values of sovereign democratic republic Regulate the acceptance & utilisation of foreign contribution[prohibit] any activities detrimental to the national interest 1. HAS BECOME EFFECTIVE FROM 1 ST MAY, 2011. 2. COMPARATIVE STATUS : 3. REGULATED BY HOME MINISTRY

14. “FOREIGN CONTRIBUTION” Means the donation, delivery or transfer, made by any foreign source of :- a) currency, whether Indian or foreign. Inclusions : a) Interest accrued on foreign contribution. b) Any other income derived from foreign contribution. c) Pass on FC money to other organisation. Exclusions : a) Amount received by way of fees or towards cost in lieu of goods & service rendered in the ordinary course of business. Next Previous DEFINITION OF FOREIGN CONTRIBUTION

15. IMPORTANT INDICATORS – a) Source is important and not the currency. b) Contribution from NRI through normal banking channels are not foreign contribution. However it is advisable to obtain the foreign contribution. However it is advisable to obtain the passport details to establish that the person sending the passport details to establish that the person sending the remittance is an Indian citizen. remittance is an Indian citizen. c) Foreign citizen making donation in Indian currency is covered under foreign sources. under foreign sources. d) OCI/Person of Indian origin : foreign source Next Previous

16. COMPANY AS A FOREIGN SOURCE COMPANY AS A FOREIGN SOURCE  A Company incorporated in India where majority share holding is by person covered under the definition of foreign source [Sec 2(1)(j)(vi)] ( HDFC, ICICI, etc. )  A Foreign Company [Sec 2(1)(j)(iii)]  Meaning of foreign company [Section 2(g) includes : - a company which is subsidiary of foreign company - a company which is subsidiary of foreign company Next Previous

17. INCOME FROM FOREIGN CONTRIBUTION a) Interest b) Rent on FC assets. c) Sale of FC assets. Next Previous

18. COVERAGE a) Extends to whole of India b) Every citizen of India outside India c) Associate branches or subsidiaries outside India of companies/ body incorporated in India body incorporated in India d) Person Earlier only Association was covered Earlier only Association was covered But now the Act is applicable to :- i) Association i) Association ii) Individual ii) Individual iii) HUF iii) HUF iv) Section 8 Companies iv) Section 8 Companies Next Previous

19. PROHIBITION PERSON WITHOUT ANY DEFINITE PROGRAM PERSON HAVING DEFINITE PROGRAM (education, social, cultural, religious, economic) a) CANDIDATE FOR ELECTION b) MEMBER OF ANY LEGISLATURE c) JUDGE, ETC. FOREIGN CONTRIBUTION Previous Next Gift from person holding Indian Passport – not a Foreign Contribution Gift from person holding foreign Passport & not relative – no regulation Gift from person holding foreign Passport & relative – intimation is required if the amount is in excess of Rs.1 lac (FC-1 within 30 days WHEN APPLICABLE? d) POLITICAP PARTY

20. Next Previous WHAT TO DO/ COMPLIANCES

21. REGISTRATIONRESTRICTIONREGULATION PERSON HAVING DEFINITE PROGRAM CONSEQUENCES Registration for 5 yrs. Prior permission Bank Books Return Intimation Admin. Cost Speculative activity Trf. To FC registered Organisation Trf. To Non-FC registered Organisation Suspension Cancellation Next Previous Renewal WHAT TO DO?

22. Next Previous BANK ACCOUNT

23. Bank Account : Next Previous BANK ACCOUNT FC Designated Bank A/c IGP Non-FC Grant (Mother A/c) Unrestricted Fund F I F II General F II

24. Bank Account : a) All foreign contribution should be received through one designated bank account. designated bank account. b) Multiple bank account are allowed for utilization purposes and the opening of such bank account is to be intimated to and the opening of such bank account is to be intimated to the Ministry within 15 days of the opening of the account the Ministry within 15 days of the opening of the account (in Form No. 6.) (in Form No. 6.) c) Foreign fund should be received only through designated registered bank account and the operational bank account registered bank account and the operational bank account should receive fund only from the designated registered bank should receive fund only from the designated registered bank account. account. Next Previous

25. Bank Account d) Fund from one operational bank account to other operational bank account should not be transferred. bank account should not be transferred. e) No local fund should be mixed either in designated bank a/c or in any of the operational bank a/c. Example – TDS. or in any of the operational bank a/c. Example – TDS. f) Expenditure/payment amounting to Rs.20,000 or more – by a/c payee cheque or demand draft (Circular dt. 21/10/2014). payee cheque or demand draft (Circular dt. 21/10/2014). g) Transfer of fund to other NGOs : whether from operational bank account or from mother bank account account or from mother bank account Next Previous

26. Next Previous BOOKS OF ACCOUNT

27. Maintenance of books of account : Maintenance of books of account : Books of Accounts Next Previous FC Grant (FCRA) Non-FC Grant Income Generation Program (I. Tax) Unrestricted/ Designated (Management)

28. Books of Accounts a) Rule 11 : a separate set of Books of Accounts & records shall be maintained, exclusively for foreign contribution received & utilized. maintained, exclusively for foreign contribution received & utilized. b) Books of accounts should be preserved for a period of six years [As per Section 19 & Rule 17 (7)]. years [As per Section 19 & Rule 17 (7)]. c) Investment Register should be maintained [As per Rule 4(1)(3)]. Next Previous

29. Next Previous SUBMISSION OF ANNUAL REPORTS/INTIMATIONS

30. Submission of Annual Report / Intimation This includes - (a) FC 4 - Annual Report for FC receipts in cash ( Earlier FC 6) (b) FC 1 - Intimation for FC receipts in the form of article/securities (earlier FC 7 & FC 8 ) article/securities (earlier FC 7 & FC 8 ) Next Previous

31. Filling of Annual Returns 1) FC-6 has been changed to FC-4 2) Mandatory Online filing of annual returns 3) Digitally signed or e-signed form FC-4 4) Uploading of scanned copies of the documents along with filing of annual returns : a) Duly signed with seal of Chartered Accountant Certificate (with CA a) Duly signed with seal of Chartered Accountant Certificate (with CA Regn. No.) (1 MB). Regn. No.) (1 MB). b) Declaration Certificate of Chief Functionary (1 MB). b) Declaration Certificate of Chief Functionary (1 MB). c) Audited Statement of Accounts (50 MB) c) Audited Statement of Accounts (50 MB) d) Bank Statement duly certified by the Officer of the bank (10 MB). d) Bank Statement duly certified by the Officer of the bank (10 MB). e) Image Dimension of Signature of Chief Functionary (140 (Width) 60 e) Image Dimension of Signature of Chief Functionary (140 (Width) 60 Height.) 50KB Height.) 50KB f) Image of Seal of Association (140 (Width) & 60 Height) Pixel only.100KB f) Image of Seal of Association (140 (Width) & 60 Height) Pixel only.100KB 5) Hard copy of the annual returns not needed Next Previous

32. Filling of Nil Returns 1) Both receipt and utilization should be nil during the previous year previous year 2) Organizations filing nil return need not submit financial statements and CA certificate statements and CA certificate Next Previous

33. Newly inserted declaration w.r.t. Utilisation of FC funds 1) It is affirmed that utilization of FC is not likely to affect prejudicially –Sovereignty and integrity of India –Security and interest of state –Public Interest –Freedom or fairness of elections to any legislature –Friendly relation with foreign state –Harmony between religious, social and other groups Next Previous

34. Change in the Format of CA Certificate The format has been changed w.e.f. 14/12/2015. Additional certification requires : a) Interest accrued on foreign contribution and other income derived from foreign contribution or interest thereon. b) The association has utilised the foreign contribution received for the purpose (s) it is registered/ granted prior permission Next Previous

35. Submission of Annual Report FC 4 to be signed by Chief Functionary Chief Functionary : Usually : President / Secretary / Treasurer / CEO not defined. not defined. Better Board meeting to define this. Better Board meeting to define this. Revision of FC 4 a) No provision to revise. a) No provision to revise. b) If mistake is significant, then submit revised FC 4 in b) If mistake is significant, then submit revised FC 4 in hardcopy with a covering letter explaining reason for hardcopy with a covering letter explaining reason for revision. revision. Top of the envelop should mention in bold Letters as “FOR FCRA WING” [ Notification No.II/21022/23/2013-FCRA-III dt. 07/05/2013. Next Previous

36. Non-Submission of Annual Report in time NextPrevious Penalty Period of Delay Rate of Penalty Minimum Penalty Grant of ` 1.00 Crore Within 90 days 2% ` 10,000 ` 2,00,000 90-180 days 3% ` 25,000 ` 3,00,000 > 180 days 5% ` 50,000 ` 5,00,000 + ` 500 per delay after 180 days ( Rs 182500 per year.

37. Compulsory uploading of financial information in public domain (Website of Organization or specified website) Annual : 1) Applicable for both FC Registered and Prior Permission Category 2) There is no financial limit ( earlier 1 cr. ) 3) To be uploaded within 9 months of the closure of the financial year year 4) Financial information includes- Audited Receipt & Payment Account Audited Receipt & Payment Account Audited Income & Expenditure Account Audited Income & Expenditure Account Audited Balance Sheet Audited Balance Sheet 5) FCRA is silent on whether to upload FCRA or consolidated Accounts Accounts 6) It is advised to upload accounts related to FCRA only 7) If no website then it is to be uploaded in http://www.fcraonline.nic.in Next Previous

38. Compulsory uploading of financial information in public domain Next Previous Quarterly ( w.e.f 14 th December, 2015 ) When? i) Detail of the donors Name, Country, Address Name, Country, Address (ii) Amount received (iii) Date of receipt By 15th of the month following the last day of the quarter in which FC is received Where? On its website or site specified by CG h On its website or site specified by CG h ttp://www.fcraonline.nic.in What Details?

39. Change in Designated Bank Account 1) No approval required for change in designated bank account 2) An intimation is required to be filed electronically online in Form FC-6 Form FC-6 3) To be filed within 15 days of such change Next Previous ( w.e.f 14 th December, 2015 )

40. Change in Board Members ( w.e.f 14 th Dec,15) 1) No approval required for more than 50% change in board members members 2) An intimation is required to be filed electronically online in Form FC-6 Form FC-6 3) To be filed within 15 days of such change Next Previous ( w.e.f 14 th December, 2015 )

41. Change in Aims and Objectives / Change in Address within the State 1) No approval required for change in aims and objectives/address 2) An intimation is required to be filed electronically online in Form FC-6 Form FC-6 3) To be filed within 15 days of such change Next Previous ( w.e.f 14 th December, 2015 )

42. Next PreviousRESTRICTIONS

43. RESTRICTIONS A) Transfer of FC fund to other FC registered organization : A certificate to be obtained from the recipient organisation A certificate to be obtained from the recipient organisation that the organization has not been proceeded against under that the organization has not been proceeded against under any of the provision of the act. any of the provision of the act. B) Transfer of FC fund to Non-FC registered organisation : i) Can be made under prior approval. i) Can be made under prior approval. ii) The application shall be made in form FC-5. ii) The application shall be made in form FC-5. iii) As per Rule 24 the total transfer to non-FC registered iii) As per Rule 24 the total transfer to non-FC registered organisation shall not exceed 10% of the total organisation shall not exceed 10% of the total contribution received. contribution received. iv) Return also need to be submitted by recipient as well. iv) Return also need to be submitted by recipient as well. Next Previous

44. Next Previous FCRA RENEWAL

45. VALIDITY OF FCRA REGISTRATION 1) In the old FCRA law, the registration was permanent in nature unless revoked nature unless revoked 2) In the new FCRA law, the registration is valid for five years and due for renewal five years and due for renewal a) Renewal for valid registration as on 01/05/2011 : the date of a) Renewal for valid registration as on 01/05/2011 : the date of validity upto 30/04/2016 validity upto 30/04/2016 b) The Circular from Ministry has extended this validity period b) The Circular from Ministry has extended this validity period to 31/10/2016 to 31/10/2016 c) In any other case if the validity period expires before 30/09/16 c) In any other case if the validity period expires before 30/09/16 that shall also be extended upto 31/10/2016 that shall also be extended upto 31/10/2016 Next Previous

46. TIME LIMIT FOR SUBMITTING RENEWAL APPLICATION As per Section 16 of FCRA 2010 read with Rule 12 - a) shall renew the certificate within six months before the date of expiry of the period of certificate and shall apply six of expiry of the period of certificate and shall apply six month before the date of expiry. month before the date of expiry. - Hence the time limit for submission of Renewal application FCRA certificate of existing organization as on 1-05-2011 on expires on 30/10/2015 - Hence the time limit for submission of Renewal application FCRA certificate of existing organization as on 1-05-2011 on expires on 30/10/2015 b) This time limit has been extended upto 15/03/2016 & now further extended upto 30/06/2016 extended upto 30/06/2016 Next Previous

47. No renewal is required for organizations having Prior PermissionNo renewal is required for organizations having Prior Permission The Prior Permission is donor specific and amount specificThe Prior Permission is donor specific and amount specific Next Previous

48. SUBMISSION OF RENEWAL APPLICATION IN FC-3 1)Form no FC 3 2) Online submission with all attachments 3) Application to be digitally signed or scanned signatures and the seal of the organization the seal of the organization 4) Filing fee Rs. 500/- 5) Payments can be made online- payment gateway as may be specified by Central Govt. be specified by Central Govt. Next Previous

49. INFORMATION AND DOCUMENT TO BE UPLOADED WITH FORM FC-3 Next Previous Sl. No Document name Max. Size limit of PDF document 1 Registration Certificate of Association 1 MB 2 Memorandum of Association/ Trust Deed 5 MB 3 FCRA Registration Certificate of association issued by MHA 1 MB The following documents in PDF format should be uploaded :

50. INFORMATION AND DOCUMENT TO BE UPLOADED WITH FORM FC-3 contd…… Next Previous Sl. No Instruction Images 1 Image Dimension of Signature of Chief Functionary should be 140(Width) × 60(Height) Pixel only. 2 Ensure that the size of the scanned signature image is not more than 50 KB. 3 Image Dimension of Seal of Association should be 40(Width) × 60(Height) Pixel only. 4 Ensure that the size of the scanned image of Seal of Association is not more than 100 KB Additional Documents / Images to be uploaded :

51. WHAT HAPPENS IF THE REGISTRATION CERTIFICATE LAPSES FOR FAILURE TO APPLY FOR RENEWAL a) Its registration shall become invalid b) However, a fresh request for registration is possible in Form FC-3 (As per Rule 9 of FCRR, 2011) (As per Rule 9 of FCRR, 2011) Next Previous

52. WHAT HAPPENS IF THERE IS A DELAY IN MAKING APPLICATION If sufficient ground in writing is provided for not filling the Certificate of registration within the stipulated time, application for renewal can be accepted within four months of expiry of Certificate of registration Next Previous

53. IMPACT OF REJECTION OF RENEWAL APPLICATION a) The Organization cannot receive fresh Foreign Contribution b) It can apply for Prior permission c) FCRA Department may provide direction on how to use the existing FCRA funds and assets existing FCRA funds and assets No clarity – status of FC income out of FC assets at the time of rejection of renewal application. Next Previous

54. Next Previous THANK YOU

55. TIME FOR DISCUSSION Previous End