Implications if NGO not registered under 12A

Dear Friends

  1. Is it legally valid to provide a Grant-in-Aid to a Registered Federation of Self Help Groups for which 12A is Applied For and awaited.
  2. Funds are domestic in nature and raised by the Donor Organisation.
  3. Does the Donor organisation, another registered society, attract any Direct or Vicarious liability?
  4. Would the Donor organisation be violating any law,  if providing such a Grant and lose any of its registrations (Society registration, 12 A, 80G and such others).
  5. What Statutory/Tax liability would the Recipient organisation attract if it were to receive such a grant towards Capital Equipment Purchase and Start-up Capital for Income Generation Activity (Value Addition/Collective Livelihoods) among its constituent members.
  6. Is it correct to state that such Tax Liability would be attracted only if the Nett Profit (Income less Expenditure) is over Rs.2.50 lakhs in the corresponding Financial Year.

A quick revert would be excellent.



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2 Responses to Implications if NGO not registered under 12A

  1. Subhash Mittal says:

    1 & 2. Giving money to any organisation (incl a Federation of SHGs) for any legal purposes, is not illegal. Yes, if one gives money to a NGO not having 12A, risk is that funds may become taxable in the hands of that entity, in absence of necessary exemption on its income.
    3 &4. No, as stated above, risk remains that funds so given may become taxable in the hands of recipient organisation in absence of S.12A. No other risk to donor organisation.

    5. Recipient Organisation if registered under 12A, would need to comply with provisions of S.11 of Income Tax Act. But no other specific requirement.

    6. If no S.12A, then entity may be taxed as AOP.

  2. Sunil Kumar says:

    Dear Sir,

    It is legally valid to give grant (local money) to unregistered entity e.g. SHG.

    It may be given for capital equipment purchase or similar activity.

    Above are valid only if these (providing grant to another NGO including SHG) are within objectives of the donor organisation.

    Since there is no non-compliance, hence there is no penalty under income tax laws.

    There is no tax liability on recipient organisation (SHG in this case) if total receipt is less than Rs.2.50 lakhs.


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