Would bank interest be treated as Income of a NGO

Posted on August 29, 2014 by SRRF

Dear Dialogue members,

I have a query regarding the income calculation of NGOs while calculating the tax liabilities. Please let me know “if the interest received on the bank deposits/ fixed deposits in an NGOs bank account should be calculated as income of the organization”? Thanks a lot for your support and guidance

Archana Kumari

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7 Responses to Would bank interest be treated as Income of a NGO

  1. Subhash Mittal says:
    September 11, 2014 at 9:01 am

    Thanks for everyone’s inputs, however I just wanted to clarify the taxable angle of the interest income being used for donor projects.

    All incomes in the hands of a charitable organisation constitutes its income. Even interest earned on corpus donation would be treated as income in the hands of the charitable organisation. Often confusion is created when a donor asks in its agreement that any interest earned on its surplus funds would be used for the purposes of its project related activities. Even when we are allocating interest to a donor, it should be understood that receipt of interest is the income of the concerned NGO and needs to be disclosed as such in its accounts and Form 10B. Application of this interest for project purposes is the application of that income. Thus while in essence NGO uses the interest for donor’s project, in its income tax return it should disclose interest as its income and expenditure of this interest as application.

  2. Jiwan Prakash Saha says:
    September 8, 2014 at 4:43 pm

    Hi Archana,

    Bank interest , if it is not specifically asked by donor , can only be treated as organization’s income else it will be added back with the grant fund. In both the cases it has to be shown as income for taxation purpose.

    Regards,

    Jiwan

  3. Archana Kumari says:
    September 8, 2014 at 7:59 am

    Dear All

    Thanks a lot for your response.

    Regards

    Archana

  4. B V Soma Sastry says:
    September 1, 2014 at 7:15 am

    Dear Ms. Archana,

    Any inward remittance of the NGO has to be treated as income be it interest on SB A/C, interest on FDs, interest on corpus, sale of assets etc. While calculating the income for NGOs it gets exempted under the provisions of the Act. But that has to be reflected while computing the income.

    Thanks and regards,

    B V Soma Sastry

    • shekar says:
      September 2, 2014 at 6:48 am

      If the bank interest pertains to an earmarked fund created out of a grant then bank interest should be credited to the fund and can’t be treated as income of NGO.

      Regards,
      Shekar

  5. Prabhjot Sodhi says:
    September 1, 2014 at 7:14 am

    any interest incomes are treated as incomes and need to be considered… but can be set aside for expenses in activities

    With Warm Regards,

    Prabhjot Sodhi
    Country Program Manager
    GEF UNDP/SGP, CEE
    C-40; South Extension Part II
    New Delhi 110049
    http://www.sgpindia.org;www.ceeindia.org

  6. Anup Khosla says:
    September 1, 2014 at 7:13 am

    Yes

    Regards,
    Anup Khosla
    Sent from my iPhone

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