CBDT’s extensive scrutiny of NGOs

Dear Friends,
We share below a news item from recent Business Standard. The news item speaks for itself, so please brace for Govt’s wrath……

CBDT’s extensive scrutiny of NGOs

Santosh Tiwari / New Delhi October 31, 2011, 1:15 IST


Tax returns of 100,000 entities under scanner, as preparation for DTC, say officials.

The income tax departments headline-making notices to non-governmental organisations (NGOs) associated with Kiran Bedi, the ex-police officer who is member of social activist Anna Hazares team, is part of an extensive national exercise, say officials.

The exercise being carried out by the Central Board of Direct Taxes (CBDT) to detect tax evasion by all such entities, a senior official told Business Standard.

About 100,000 NGOs have filed tax returns in 2010-11 and the department has started picking up the cases for scrutiny on the basis of certain criteria relating to the type of NGOs and financial activities beyond a specified limit, he added, while declining to provide details.

The charitable activities of NGOs associated with relief to the poor, education, medical relief, protection of the environment and protection of archaeological monuments and any other purpose of general public utility are not taxable. Commercial activities of NGOs in any other purpose of general public utility, however, are taxable, said the official.

We are taking action under this provision of the Income Tax Act and this is going to happen on an extensive basis. Notices to Kiran Bedis NGOs have gone under this exercise, he said.

Under the I-T Act, charitable purpose includes the advancement of any other object of general public utility. However, the advancement of any other object of general public utility is not a charitable purpose if it involves the carrying on of any activity in the nature of trade, commerce or business. Or, any rendering of service in relation to any trade, commerce or business for a cess or fee or other consideration, irrespective of the nature of use or application, or retention, of the income from such activity, if receipts from such activity is more than the specified limit in the previous year.

The Finance Act, 2011, raised the specified limit from Rs 10 lakh to Rs 25 lakh for such activities. The official said under the proposed Direct Taxes Code (from April 1, 2012), the surplus income of NGOs were slated to be taxed at 15 per cent and the department was conducting the current exercise to prepare a map for handling these entities in the new taxation mechanism.

A study commissioned by the government put the number of not-for-profit entities at 3.3 miliion till 2009.

The actual number could be much larger now, as the study, commissioned in 2008, took into consideration only those registered under the Societies Registration Act, 1860 or the Mumbai Public Trust Act and its variants in other states.


Source: Business Standards Website

Socio Research & Reform Foundation
(A Non Government Organisation)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008
Tele/Fax: +91-11-25821088, 25817157, 25722044
e-mail: socio-research@sma.net.in

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7 Responses to CBDT’s extensive scrutiny of NGOs

  1. c udayashankar says:

    Not a comment but a question for my follow-up.
    Is there any questionnaire from CBDT to NGOs under scru tiny?

    Are the Trustees / Governing Body Members supposed to furnish details of all the other Societies / Trusts they are associated with as part of the extensive CBDT scrutiny of the chosen one ?

  2. S. Motilal Reddy says:

    Dear Sir,

    Thanking you very much for your information bulletins. we hope in the future course of time
    will also be continue to know the policies.

    Thanking you with best regards

    S. Motilal Reddy

  3. Amita Joseph says:

    Anything to harass NGOs!! Its because the sector does not come together – if this had happened to the Corporate sector the CIIs & FICCIs will be up in arms!!!The non profit sector does NOT tell its story well ( that the most path breaking work in the country be it in RTI, water, wasteland development, disability, etc came from the non profit sector) nor does it speak in one voice or for each other esp on critical issues. Till it does all this continues..including tightening of FCRA, etc, etc.


  4. Deepak Bansal says:

    Dear All

    Pl. note that as per information available . Income Tax department shall b picking up cases for scrutiny where the NGO has claimed TDS on its earning. It sees that Income Tax department would like to see the nature of income earned ( on which TDS has been deducted) complies with the requirement of 2(15) clause.


  5. T.K. Balappan says:

    Yesterday’s report that the accounts of more than 1 lakh NGOs/CBOs are under scrutiny and the input will be utilized while formulating the DTC code is definitely disturbing to the NGO sector. But the name of Kiran Bedi figures prominently in that news item/article.

    Here, my personal opinion is that she should have charged only the actual fare paid. However justified the extra(?) money she claimed, it is difficult for me to digest to the argument or justification for the claim which was more than the amount actually spent.

    T.K. Balappan

    • amita says:

      Kiran Bedi did not use it for personal gain. She donated it to the NGO. Given that it is not easy for NGOs to get Admin support I think one understands why it happened. Donors only want to fund programs. Even a legitimate 15% admin cost when included is questioned. How is one to raise funds to pay rent, etc? Or are we supposed to survive on goodwill & fresh air?

  6. Marietta Vaz says:

    Thanks for the update we will share with all members in our networks as well!!!

    All the Best!!!

    Marietta Vaz
    Lead – Capacity Building
    +91 – 8754508057
    CSO Partners
    No.33, I Floor, Eldams Road,
    Alwarpet, Chennai – 600 018
    Ph: +91 044 – 4211 2256

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