Changes in CSR effectively rule out ‘Societies’ & ‘Trusts’ from accessing CSR funds

Changes in CSR effectively rule out ‘Societies’ & ‘Trusts’ from accessing CSR funds

Another blow to the Non-Profit Sector by the Govt. Ministry of Corporate Affairs has brought out draft rules for changes in CSR rules. The proposed rules now specify that only following entities can implement CSR Projects.

  • Company itself or in collaboration with another company
  • a S.8 company
  • any entity established under an Act of Parliament or State legislature (likely to be only Govt / Autonomous bodies promoted by Govt)

This effectively rules out Societies or Trusts from accessing CSR funds. Considering Societies/ Trusts form 90% of NGO sector organisations, this will impact most NGOs.

However all is not lost, these are still DRAFT rules, and govt has invited comments from public. We are giving a ready link for you to connect to the webpage, where you can give your comments.

In view of the severe adverse impact that such a change would have on NGOs finances, we request all to submit comments asking Govt to reconsider removal of ‘societies & trusts’ from accessing CSR funds. In this regard, we can request that old rule which required at least three years successful track record for all NGOs, irrespective of legal format be continued.

Soon we will bring a comprehensive note on proposed changes in CSR Rules on this forum itself.

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in CSR | 15 Comments

En masse Inspections by Govt

En masse Inspections by Govt

Further to our last post on this subject (http://blog.srr-foundation.org/?p=3860), it is now clear that FCRA Dept has issued notices en masse to a large number of NPOs, with large amount of funds under FCRA. These are not just international NPOs, who are registered in India, but also include totally Indian NPOs, who receive large FCRA funds. In this post we examine the legality of notice that has been served to these NPOs.

Notice has been issued under S.23 of FCRA 2010 to undertake inspections. S.23 obligates the Govt to ‘record in writing any ground to suspect that any provision of this Act has been or is being contravened’. The words record in writing is important, and the Dept must not only record these reasons in writing but also disclose the same when asked for.

Some have argued that the notice issued does provide reasons as it state that the Govt ‘has reasons to believe after a preliminary scrutiny of the Annual Returns that some provisions of the FCRA Act have been violated’. Exactly same language has been used in all notices. However this is too general while reasons to be recorded need to be specific.

In fact S.20 of FCRA Act provides for an audit exactly on the grounds mentioned in the notice. One may wonder then why has FCRA issued the notice under S.23, where one could challenge the Notice, and not under S.20. It may be noted that S.23 authorises the authority appointed to seize accounts and records and produce before the court. This could initiate a series of actions which would not remain within the control of the NPO. Further it may be noted that S.23 requires that the person to undertake inspection must be a gazetted officer holding Group A post. Though the section goes on to authorize the Dept to authorize any other officer or organisation to undertake the inspection, one needs to carefully examine the legal ramifications of the same.

In conclusion, it is time for NPOs to weigh carefully consequences of not challenging the notice and submitting themselves for inspection under the belief it to be a routine inspection.

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | 1 Comment

Notices under S.23 of FCRA Act

Notices under S.23 of FCRA Act. 2010

It has come to our knowledge that currently several International NGOs are receiving notices from FCRA Department for various reasons including inspection under S.23 of FCRA Act 2010.

This seems to be first time when routine notices are going to several International NGOs in one go. Seems latest development in relationship between Government and International NGOs.

Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | 3 Comments

Deduction of TDS on Grants

Dear friends,

I request your guidance on the following query.

If an NGO ( Grantee) has 12 A certificate but does not have 80 G certificate, and if the same NGO is getting donation / grant from an 80 G registered organization ( funder), should the funder deduct TDS.

Awaiting your reply please.

Regards

Neelima

Posted in FCRA, TAX, LEGAL | 5 Comments

Tax Exemptions & New Tax Slabs

Dear Friends,

Season’s greetings!

Those who opt for new income tax slabs have no incentive to donate for charitable purposes.

Is it not?

Do corporates get exemption on CSR spending? If yes, why do they insist on recipients to have 80 G? Such multiple exemptions on the same fund are in error. Is it not ?

Udayashankar 

Posted in FCRA, TAX, LEGAL | Comments Off on Tax Exemptions & New Tax Slabs

Letter to Finance Minister on Budget 2020 for non-profit sector

Dear SRRF Dialogue Members,

We are glad to inform that CSO Support Cell on behalf of civil society, has submitted a letter to Finance Minister with around 130+ signatures earlier today.

The speed with which this letter has been organised is commendable.

However in case you have not been able to sign, we are providing a editable version of letter drafted by SRRF and which can be used by individual organisations, development professionals in their individual capacity to submit the same to Finance Minister. You can take a printout of the submission on your organisation’s letterhead or if in personal capacity, then in personal name. Address the letter Finance Minister, in subject matter enter CHARITABLE ORGANISATIONS – ADVERSE PROPOSALS, etc. Send it to Minister of Finance, North Block, Ministry of Finance, New Delhi 110001

If you wish to submit these online. You can login https://mygov.in.  For this you will need to create a account, to easily create account, you can use social media account like Google or information as requested. Once the account is created, you can login through a link at the bottom of the screen CITIZEN SPEAK. Once you have logged in, you will get window to type your comment or even attach a document.

Hence either option is available, as per your preference. Download the copy of the letter from here. Click here to download the letter.

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Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in General | Comments Off on Letter to Finance Minister on Budget 2020 for non-profit sector

Budget Proposals: NPO Taxation‎

Budget Proposals: NPO Taxation

In today’s post, proposals relating to registration requirement for New NGOs are covered.

NEW NPOS

S.12AA/S.80G/S.10(23)

Earlier any NPO wanting to apply for registration under S.12AA or S.10(23C) could do so anytime. Generally once granted approval, it was applicable form the Assessment year in which the NGO applied. However now the new NGO will need to apply before the commencement of the financial year (at least one month prior the commencement of the FY) from which the NGO wishes to avail Income Tax exemption. Thus if an NPO is formed say on 2nd March 2020, it cannot apply for registration, which would cover Financial Year 2020-21. Its income could be exempt from tax only from FY 2021-22, provided application for exemption certificate is made at least before 1st March 2021.

Once applied, a provisional certificate will be issued within one month of filing the registration application. The provisional certificate would be valid for 3 years. This is a positive development, as it will reduce corruption and hassles that new NGOs face while applying for S.12AA registration at present, as they are required to prove that their activities are genuine.

For converting provisional certificate into a Final Certificate, one would need to apply 6 months after starting the activities or six months prior to expiry of the provisional certificate whichever is earlier. Tax authorities will have six months to decide before issuing the final certificate.

Similar process is applicable in case of S.80G & S.10(23).

Only one registration to be opted out of S.12AA or S.10(23)

It may be noted that in future only one registration under Section 12AA or S.10(23) will remain operative. Thus in case of a new NPO, if it already has S.12AA registration, as soon as it obtains S.10(23) registration, it will have to opt for cessation of the earlier registration under S.12AA. In case of existing NPO having registration both under S.12AA & S.10(23), they will need to opt for one and then continue only that one in future.

Remaining aspects of changes in the Budget would be covered in next post.

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Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | 2 Comments

Budget 2020 – Existing NGOs 12AA Registration

All NGOs need to reapply for 12A / S.80 G certificates

EXISTING NGOS

Budget 2020 has brought bad news to all non-profit organizations, everyone would need to reapply for renewal of 12AA & 80G and S.10(23C) certificates. Let’s deal with each one of these registrations separately. In today’s post, position of existing NGOs is being covered, who already hold these registrations.

Certificate under 12AA

As all of us know, all non-profits who want their income exempt from Income Tax have to hold certificate under S. 12AA. This makes their income exempt from taxation, as long as they comply with S.11 conditions of Income Tax Act. Under the proposed budget provision, Section 12AA has been withdrawn and new Section 12AB has been inserted. As per this section all those holding certificates issued under 12AA or 12A would need to reapply for the certificates within 3 months of the section 12AB becoming effective. Thus all existing NGOs would need to apply for renewal of exemption certificate under S.12AB within 3 months of the notification date. 

The new certificate will be applicable from the Assessment Year from which the registration was issued originally. There is confusion based on drafting of the Budget provision, since it says that the certificate would be applicable for 5 years, however if an NGO’s original S.12AA certificate was effective say in 2010, then would it expire in 2015. We are sure that is not the intention and hopefully necessary correction would be incorporated in the certificate, ensuring 5 year’s from the date of current application.

The good thing is that the Income Tax Dept would need to decide about certificate within 3 months from the date applied.

Certificate under S.80G

Similarly a new application would need to be made for obtaining a new certificate under S.80G within 3 months of the notification notifying this clause becoming effective. Thus an application would need to be moved for obtaining a new certificate under this section.

Certificate under S.10(23C)

All entities holding registration under S.10(23C) would similarly need to reapply for a certificate under the new amended S.10(23C). Provisions are similar lines as described above for S.12AA certificate, that is, to be applied within 3 months from the date of notification, and decision to be given within 3 months of receipt of application. In case an NGO presently has both the S.10(23C) as well as S.12AA certificate, then S.12AA certificate would become inoperative.

Provisions for New NGOs would be covered in next post.

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Socio Research & Reform Foundation (NGO)
512 A, Deepshikha, 8 Rajendra Place, New Delhi – 110008

Posted in FCRA, TAX, LEGAL | 6 Comments

Purchase of USG machine for Hospital

Sir,

Can a non FCRA registered Trust take financial help from FCRA registered organisation for buying USG machine and other equipements for its small hospital having licence from the government?’

Please do reply soon.

With best regards.
Samir Kr. Halder,

Posted in FCRA, TAX, LEGAL | 1 Comment

Rectifying error in Quarterly returns

Dear Members

An Indian entity transferred money to our FCRA account in March 2019. We informed the bank and the funds were returned immediately.

While filing quarterly returns the amount has been mistakenly shown as income. Is there a process to correct this?

Thanks

Dr.Prahalathan KK,
Co-founder, Bhumi

Posted in FCRA, TAX, LEGAL | 4 Comments