Dear Members,
I like to know whether the building and assets made by foreign donation collected by an organisation holding FCRA can be given to another organisation on lease basis. Whether lease or rent is permissible by the Ministry of Home affairs.I request to let me know the issue soon please.
Regards
Samir Kr. Halder
Dear Samir Kr. Halder,
In the FC-4 return, there is a specific question that asks if there is any un-utilised land and building. The question doesn’t ask if it is being untilised by the organisation. Therefore it is open to interpretation. From the organisation side you could interpret that the organisation is not utilising it but it is being utilised by someone else. From the department side they can interpret that the organisation has not utilised it. So it all depends how department looks at it.
After the amendment in the act, even contribution from one registered organisation to another registered organisation has been disallowed. As per the understanding it applies to allowing the use of assets as well.
If the building in question is a substantial part of your asset pool and you use it to derive rental income, it may be considered by the department that the asset has not been used for the purposes allowed under FCRA.
Under income tax act you will have to ensure that the rental income doesn’t exceed 20% of your total income during the financial year.
Therefore in your case you have to analyse the significance of the Building with regard to your asset pool and make a decision and record it. Further if you decide to get the rental income, you will have to ensure that there is no conflict of interest situation, for e.g. the other NGO have one or more same trustees as your organisation and you have to ensure that the rental income is at arms length transaction price.
Regards,
Ritesh
Any asset owned by an NGO, can be used by the NGO for its benefit, whether for self-occupancy or for rental. Only restriction is that a FCRA asset’s ownership cannot be transferred to another NGO (S.7).
For Utilisation of Land & Building, one would need to give ‘purpose of utilisation’ in FC4, as given by donor while giving grant for acquisition of the property or as declared by the donee to donor, while applying for Grant. Generally buildings may be used for specific project purposes or for own use or partly for own us and partly for rental purposes. All this would be considered as Utilisation.
Concern could be if the Land & Building has been procured purely for investment purpose, then FCRA Dept may have certain objections.