I have now joined another NGO called “Pratham Books” in Bangalore. They are into developing, publishing & distributing children’s books in various languages and promoting reading habit among children.
I have a query in this. We receive grants/donations from various Donors to develop and distribute books. When Donors are Foreign based, we receive grant in FCRA account. But since, development and printing done in India, books are accounted and stocked in our Local Books, from where we distribute it. Can we transfer Foreign money to our Local account for this distribution? Can opening a Utilization Account will help us?
Looking forward for your response.
Regards
Pragya
Thank you all for replying to my query. it was really useful.
Just to elaborate my point. Actually as I said, we develop, print and distribute the books (children books) to various schools, libraries and individuals at nominal cost. Say for eg. We develop a book \’xyz\’ whereby we pay to author,editor,translators etc and then we print in bulk say 1000 copies. Putting all cost together, cost of book comes to Rs.10/- each. (We are registered with VAT and file Returns). Now one Foreign donor gives us Rs.5000/- to distribute 500 copies (500 copies x Rs.10 each). We have already incurred total cost in local fund and stocked our books in local account as book is already developed. So the situation comes where receipt is in Foreign Account and Expense in Local Account.
But as you all said, we can not transfer funds from Foreign to Local Account as FCRA Act restricts the same. May be we need to find out the way where a portion for development (of book) cost can be paid directly from FC and printing cost (which is directly related to quantity donated) can be paid from FC.
Regards
Pragya
Thanks for clarification, even I was wondering how a person trained under SRRF is confusing such basic issue.
Pragya issue is far more complicated as it touches upon ‘mixing of funds’. I think this is a good issue to be covered under SRRF Advisory.
rgds
In a number of mix-ups of FC and LC either in financial statements or bank accounts, it has been observed that such mix-ups are due to attrition of trained staff or inability of NGOs to retain the trained staff and delays in getting the new staff trained on treatment of transactions in books of accounts and maintenance of bank accounts and related registers. Separate bank accounts for FC and LC in a given cluster of project villages, separate registers for equipment purchased using FC and LC and even FC reserve and LC reserve.
Mix-up seems unavoidable only in cases of PF remittances from only one account though salaries are paid from both FC and LC to different categories of staff.
Thank You Sir.
I like to extend the dialogue to cover a new point. Query: As CSOs / NGOs publish books and manuals after doing considerable research,
is it possible for such Agencies to get registration / exemption under section 35(correct?) of the IT Act so that the donors get total donation exempted from taxation?
Section 80G gives , I am told by Soma Sastryji, only limited benefit to the donor-50% of the donated fund exempted from tax. The publisher can mention all the details of such exemptions welcoming donations/contributions. Safety lines like \\"for private circulation\\" can be printed on the cover page. Please respond to the query on R&D based publications.
I like to extend the dialogue to cover a new point. Query: As CSOs / NGOs publish books and manuals after doing considerable research,
is it possible for such Agencies to get registration / exemption under section 35(correct?) of the IT Act so that the donors get total donation exempted from taxation?
Section 80G gives , I am told by Soma Sastryji, only limited benefit to the donor-50% of the donated fund exempted from tax. The publisher can mention all the details of such exemptions welcoming donations/contributions. Safety lines like “for private circulation” can be printed on the cover page. Please respond to the query on R&D based publications.
Dear Uday,
Issue raised by you is basically relating to how donors can get more than 50% tax benefits (as rec’d under S.80G). I feel this is another very important area, which SRRF needs to come out with a separate advisory.
rgds
Hello Pragya,
There are diverse responses coming from different members. I think Soma Sastry has adequately answered your queries, however just to reiterate FCRA funds should not be transferred to local account of the organisation. I am not sure why you need to do that in any case. As stated by him you can open a Utilisation Account, but the nature of account remains FCRA only. Thus treatment of a Utilisation Account is no different than a designated FCRA account. Purpose of Utilisation Account is convenience, say a donor insists on a separate account or funds are required to be utilised at another location.
Srirman has highlighted another very pertinent point, which should be considered wherever possible. One suggestion to manage this has been given by Uday Shankar. The issue raised by him needs to be dealt at a separate level.
Sekar, FCRA only prohibits acceptance of FCRA funds by certain persons printing or publishing a registered newspaper, but not books.
Hope above is useful and answers your queries.
warm rgds
Dear Ms Pragya,
Greetings!
This is in reference to your below appended mail, As per my understanding you can transfer Foreign money to your Local account for this distribution, hence development and printing done from grants/donations which received in FCRA account. If you asking/stating to opening a Utilization Account as separate account to bank. I think there is no need for this.
Regards,
L N Sharma
Dear Ms Pragya,
If I remember right, FCRA 2010 restricts use of FCRA funds for publication and printing of books.
Regards,
Shekar
Bangalore.
WORTH MENTIONING IN THIS CONTEXT THOUGH WELL KNOWN:
INSTEAD OF PRICING THE BOOK OR USING ANY OTHER TERM THAT ATTRACTS IT, ONE CAN PROBABLY MENTION “DONATIONS / CONTRIBUTIONS
ARE WELCOME” appropriately. If the NGO got exemption under section 85 and / or section 35 that deals with R & D, the same can be printed on the opening / last page. Even otherwise registration under 12A which is compulsory, probably protects the donations / contributions from IT. Am I right?
Query: As all the books and publications in voluntary sector are based on R & D, can such agencies get registered under section 35 and show the contributions received be shown under section 35 with a statement that such funds would be used for further R & D?
It is interesting and answer will be more useful for FCRA use!
H D Bist
(Professor I I T Kanpur ,Retd, (1995),
Emeritus Scientist, CSIR , Retd (2000)
Emeritus Fellow ,AICTE, Retd (2003)), )
Secretary, “HIMALAYA WATER SERVICE TATHA VIKAS AVAM PARYAVARAN SANRAKSHAN SAMITI, Village Darah, District-Champawat, Uttarakhand
“Education is the manifestation of the perfection already inherent in man” Swami Vivekananda
“There is no issue more important, more unifying, more urgent, or more universal, than the welfare of the children.” Kofi Annan.
I fully endorse the views of Mr Soma Sastry. In addition to what he has stated, what is not clear to me from your query is, if the books produced are distributed free of cost or if any token cost is recovered. If so, then the tax implications will need to be re examined, both from the point of view of direct as well as indirect taxes. Pl share details.
Best regards
Sriraman
Dear Ms. Pragya,
Greetings from Hyderabad!
From the query you have raised, I am assuming that you are printing books using both FC and NFC funds. For designing and printing the books funds do not have to be transferred to local account. The payment can be made directly from FC account after deducting the applicable TDS for designing (10%) and printing (1% or 2%). You would also be clear as to what number / kind of books are printed from FC funds and NFC funds.
Please note that transfer of funds from FC to NFC and vice versa is not allowed as this is the violation of FCRA. Even if you open a utilization account and transfer funds to the account, the nature of the funds i.e. FC will not change.
I hope your query is answered or feel free to further elaborate the query for further clarity.
Thanks and regards,
B V Soma Sastry