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
Hi Neelima,
Grant with a specific purpose to undertake an assignment, without an intent of deriving profit and for the benefit of a larger community, should not attract TDS. Especially when a 12A entity is granting to another 12A entity a grant, it should be exempt from the provisions of S.194XX.
A contract for services, if comprise of a profit element, would attract TDS because of it’s legal nature. So, it would be ideal to evaluate how the agreement between the two parties has been drafted before arriving at a conclusion whether TDS applies or not.
Best wishes.
Neelima ji
Grant per se should not have any tax implication. Therefore the concept of Tax Deduction at Source (TDS) or any other Taxes (GST), does not arise in case of a grant. If the donor deducts TDS, then it is no longer considered a Grant/Donation.
In cases of NGOs issuing 80G receipts to it’s donors, If the donor deducts TDS and asks for 80G receipt post a donation/grant, we cannot/should not provide the same as 80G is only for “Donations” (as per the defined criteria of IT Dept)
In the given case the NGO has received grant which must be supported by an agreement from the donor. The TDS deduction from the grant is not applicable under any section under194 . No TDS to be deducted while making payment made by the donor.
Hope it clarifies.
Thank you for your response. My understanding is the same. Yes there is agreement between both stating that the donation is a grant. But the donor still deducts TDS blaming it on advice given by their Statutory auditor.
Dear Neelima,
Grant (where the relation is of grantor- grantee) per se does not attract TDS as long as both the organizations have the registrations under Section 12A. Applicability of TDS has nothing to do with the registration under 80G. 80G is only for the donor to get certain tax exemptions from his/her income while filing the ITR. In case the NGO does not have 12A, then there is a scope of establishing vendor – vendee relationship, which will attract TDS. This is my understanding of the issue.
Thanks and regards,
B V Soma Sastry