Greetings from Hyderabad!
Can the own funds of the NGO be converted into Corpus Fund based on the decision of the BoT/GB?
Thanks and regards,
B V Soma Sastry
Many thanks for such detailed explanation. As suggested by you I will also look for other references.
B V Soma Sastry
Dear B V Soma Sastry,
As per my view, First of all we have to categories the nature to the of own fund of NGO, on based of that may be some fund converted in to Corpus fund. However, to take the corpus fund require in writing from donor as ‘donation for CORPUS FUND.
L N Sharma
Treatment of fund which is left out after applying 85% of income is at the discretion of the NGO. However one needs to understand the concept of corpus in Income Tax. Any receipts treated as corpus would not form part of income. For example if a donor gives a corpus donation than it would not form part of income of the NGO and would directly be taken into the corpus fund in Balance Sheet. However this corpus cannot be taken back as income without the permission of the donor. However if the NGO wants and donor permits corpus can be taken back as income. In that year it will become part of income of the NGO and the test of application of 85% would become applicable.
From the above arguments, it can be seen that there is no benefit from Income Tax point of view in declaring 15% of the income not spent as corpus, since it has already passed the test of 85% application. In fact 15% is in a way part of corpus only, i.e. it need not be spent. However by transferring it to a corpus account, the NGO is just restricting the use of its revenue reserves, which otherwise are freely available to it.
However corpus is a complicated subject, and welcome views of others on this important topic.
Comments are closed.