TDS on Bank Interest for NGOs

7 Responses to TDS on Bank Interest for NGOs

1. Izhar Ali says:

   September 2, 2013 at 5:50 am

   An NGO may take refund of TDS amount from Income Tax Department after submit annual income tax return if TDS deducted by bank or others. NGO may apply to get TDS Exemption certificate from Income Tax Depart under section 197 and fill form number 13 alongwith with required documents.

   Izhar Ali
   Finance Officer
   CSD
2. CA Avineesh matta says:

   August 31, 2013 at 12:33 pm

   Even if a Trust/ NGO provides the Bank with sec. 12A registration, tax returns and balance sheet etc., Banks are mandated to follow statutory provisions. Hence, it will not work. Only option is obtaining certificate low/ no deduction of tax under section 197.
3. Ajay says:

   August 31, 2013 at 7:17 am

   My opinion is given as under:

   1. When we receive foreign funding for any project we may not spend the money immediately after receipt in many cases. We get some bank interest if we keep these funds in Bank Fixed Deposit until we need the money. The bank deducts TDS if the interest is more than Rs.10,000/.

   Response: Yes, we can go for FD for amount not spent

   2. Is there a way to see that the bank does not deduct TDS as our society is registered under section 12 A of Income tax Act like giving form 15G etc?

   Response: Yes, we have to get the exemption letter from Income tax deptt for interest income so Bank will not deduct TDS if amount if more than Rs. 10000/- p.a.

   3. If the bank deducts TDS on bank interest how to treat this in our accounts?

   Response: We should show as interest income towards fixed deposit

   4. Can we claim back this amount from Income tax department as our organisation is registered under section 12A?.

   Response: Yes, If we are not able to get the exemption certificate then it will be refundable from income tax afer filing the income tax return.

   Regards/Ajay
   Our Philosophy: Quality and Patients First.
4. B V Soma Sastry says:

   August 31, 2013 at 7:05 am

   Dear Vidya Sagar,
   Greetings from Hyderabad!

   This is with reference to your query:

   1. It is true that NGOs do receive the funds from the donors and we are not able to us the funds immediately. In most of the cases these days, the interest whether on FD or savings, needs to be reported to the donor. Also, there are certain donors who are very categorical that their funds should not be invested. We should be careful on this count.
   2. I would suggest that you provide a copy of 12A along with an application to the bank requesting them not to deduct the TDS on interest. I am not very sure if this will work. Infact, we need to seek specific approval from the IT department for exempting the interest amount from tax. This is issued for a specific period of time.
   3. The TDS deducted by the bank will appear as TDS receivable under current assets and to track the refund we have to also mention the year. This will help us to nullify the entry upon receipt of the actual refund.
   4. The amount can be claimed back from the IT department at the time of filing the annual IT returns. How much time it will take for you to get the refund is a question mark. We, at CWS got our refund after almost 3 years.

   I hope this clarifies your doubts.

   Thanks and regards,

   B V Soma Sastry
5. Satya Samdani says:

   August 31, 2013 at 7:01 am

   We also run an NGO,a registered society and also registered under 12 A of Income tax laws.If the interest income exceeds Rs.10,000/-,the bank deducts TDS and issue Form No.26 A.The TDS is entered to the debit side of the cash book.The Society or NGO registered under 12 A is required to get the accounts audited by a C.A. and submit Income Tax Returns alongwith the balance sheet. If the income of the Society is below the taxable limit the society gets refund.One more thing I want to add the the Society is required to spend at least 85% of its income in the same year.If the total expenditure is less than 85% , the society can pass a resolution to set apart this amount and spend the same in the next three years on its objectives. If this is done,no tax is levied on the set apart income and we can get refund of the TDS amount.
6. L N Sharma says:

   August 31, 2013 at 6:54 am

   Dear Sir,

   Thanks for sharing us the issue of bank interest.

   As per my knowledge of NGO accounting , the bank deducts TDS if the interest is more than Rs.10,000/. Yes, we can claim the said TDS from ITO department on base of TDS certificate. And interest is as income from certain bank account. There is no matter in this regards of the 12A.

   Regards,

   L N Sharma
7. Bhavesh Soni says:

   August 31, 2013 at 6:22 am

   Dear Vidya Sagar,

   First of all 15g is required for interest upto Rs. 1,60,000/- for year and above the limit of 1.6 lac the Form 15g do not work for TDS purpose.

   Second thing you may file Form 13 with your Income Tax officer for lower deduction of TDS or Nil deduction of TDS.

   Finally if Bank deduct your TDS on interest amount you should claim it in your income tax return as refund.

   And for Accounting purpose you may show this TDS receivable as assest in your books of account and settle whenever you get the income tax refund.

   Regards,

   Bhavesh

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