Recent amendment in treatment of donation paid to other NGOs

Posted on March 3, 2023 by SRRF

Dear Sir

‎There is amendment in the law that if the donation is paid to other registered trusts / ‎institution, only 85% of such donation shall be treated as application for charitable / religious ‎activities.‎

‎Can you please explain little more for understanding purpose, especially it’s real ‎meaning, impact and how it will be executed. How shortfall of 15% will be ‎reported/managed.   ‎

‎Thanks & Regards

S. Kumar

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2 Responses to Recent amendment in treatment of donation paid to other NGOs

  1. SRRF says:
    March 6, 2023 at 7:27 am

    Donation by NPOs to another NPO to be allowed upto 85%

    Effective AY: 2024-25 onwards, donations given by one NPO to another, only 85% will be allowed as application to the first NPO. We illustrate for better understanding as follows:

      Pre Budget (Lakhs) After Budget (Lakhs) Loss (Lakhs)
    Income of
    NGO giving grants to other NGOs    		 100 100  
    Grants given to other
    NGOs    		 60 60  
    Other Expenses 25 25  
    Total Application for
    Tax purposes    		 85 76
    (60*85%+25)    		  
    If no accumulation
    Tax payable    		 – 9 (2.7)

    Thus, net impact of an NGO who mainly gives grants to other NGOs, is that either it has to increase accumulation or pay taxes. In long run, no NGO can continue to give more grants to recoup what it is not being allowed to claim as its genuine application.

  2. Dr.Anil Dhaneshwar says:
    March 3, 2023 at 9:46 am

    This is another way of outsourcing of social work by the NGO / Trust who are supposed to do. While out sourcing the donor trust keeps some 10% to 15% towards their perceived brand value to raise funds from corporate donors which another Trust or NGO may not have. There have been cases that there has been such outsourcing to more than two Trusts or NGOs. Thus at every level at least 10% to 15% cut reduces funds for the social causes by at 30% or so. This vitiates the sole purpose of CSR or social funding. In fact all 100% is supposed to be spent for the benefit of the society. If the original Trust who has received funds spends that amount directly then by CSR rules 10% are allowed to be retained towards overheads and evaluation charges.

    The sole purpose in making out this rule is that 100% amount should be spent on the social causes. This needs to be interpreted in a positive manner. This has come out of Tata Trust engaging a third party NGO to carry out social activites on their behalf. Ideally now NGO or Trust will spend the funds than what they have received in the form of donation from the donors.

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