Socio Research & Reform Foundation

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.

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

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

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

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 

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 2^nd 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 1^st 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.