Socio Research & Reform Foundation

UNION OF INDIA Versus M/S SHARMA CENTRE FOR HERITAGE EDUCATION, SLP(C)No. 26284-26285/2025[1]

We refer to Madras HC case that we reported only a few days back (https://blog.srr-foundation.org/?p=4788), where Justice N. Anand Venkatesh had decided in favour of appellant NGOs, whose FCRA registration was not renewed by FCRA Dept. HC had quashed the refusal letters of the Dept, and asked the FCRA Dept. to issue renewals.

FCRA Dept filed a Special Leave Petition in the SC, requesting to quash the HC Order. Matter was heard by Bench of Justices Vikram Nath & Sandeep Mehta. In a sharp comment to Additional Solicitor General representing Dept, Justice Nathasked

Have they misappropriated? is there any abuse of these funds received by them? There is no such finding at all. If they are doing some social service for the society, what is your problem? You monitor, keep a check, let them file their accounts annually – that’s all. Don’t complicate things, don’t further harass them. Comply with the High Court Order.

Effectively with this decision of SC, the two NPOs which had gone to the court for relief have been granted the relief. It is fervently hoped that more NPOs will pick up the baton and go to the courts for relief and not wait endlessly for FCRA Dept’s mercy.

Dept’s strict attitude while considering NPOs applications, can be seen from the unreasonably high rejection rate, that MHA has published in its Annual Report for FY 2023-24.

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

[1]https://www.livelaw.in/top-stories/supreme-court-rejects-union-challenge-to-high-court-order-for-renewal-of-ngo-fcra-registration-304484

Madras HC quashes refusal to Renew FCRA because funds were transferred from one sister NGO to another without any malafide

Sharma Centre for Heritage Education & Ellen Sharma Memorial Trust vs Union of India &Anr.^[1] [CMA No. 746 of 2022 & WP No. 4887 of 2022 – Madras HC: Order dt 27-06-2025)

Madras HC (Justice N. Anand Venkatesh) decided in favour of appellant NGOs, whose FCRA registration was not renewed by FCRA Dept. The denial letter stated that renewal was denied based on S.16(1) read with S.12(4)(a)(vii) of FCRA 2010. The communication did not specify the nature of violation.

FCRA Dept in its response, filed a counter affidavit alleging violation under S.7 of the Act, stating that funds had been transferred among the sister NGOs without prior approval. Dept argued that this violation disqualified the NGOs from receiving renewal.

In its judgement, the HC recorded that the Dept’s communications have not contained any reasons except stating that the renewal was refused under S.16(1)…. Of the Act. Court held that the breach by the parties was minor, as the Dep’s own report delivered to the Court in sealed cover, did not show any material that the two Trusts had misused the FC and that there was no personal gain no diversion of fund for undesirable purposes. The court stated that transfer of funds, without any allegation of mis-proprietary is nothing more than a procedural breach. The Court quashed the FCRA refusals and stated that the petitioners should be granted renewal.

https://24law.in/story/madras-high-court-sets-aside-fcra-renewal-rejection-holds-technical-breach-under-amended-section-7

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

Dear Members,

Require your opinion:

If a FCRA certificate holding Society-cum-Trust has obtained permission from the Charity Commissioner to sell its immovable property which was purchased 20 years back from its Foreign funds. Now, the authorized buyer which is a LLP company or a Trust wants to electronically transfer the amount agreed upon.

QUESTIONS:

1. Which FC account should the buyer be advised to transfer to: the main account at SBI, NDMB or its FC utilization account (from which the immovable property was purchased)?

Kindly guide us.

Dhruv Mankad

Most NPOs were granted their 12A and 80G registration certificate in the year 2021. ‎These certificates are valid for 5 years (in case of Regular or Final Registration) from the date of registration and renewal will in most cases will remain effective till AY 2026-27.

The renewal process must be initiated at least 6 months before expiry of the 5-year registration granted under S.12AB [See S.12A(1)(ac)(vi)].

Thus if your NPO rec’d the 12A registration during FY 21-22 covering AY 22-23, then if it has been valid for 5 years, it will expire at the end of AY 26-27, i.e. 31-3-2026. Hence you need to apply at least 6-months prior to expiry, i.e. before 30^th September 2025.

There is some confusion whether 12AB has been extended for 10 years, since section 12A(1)(ac)(vi) now states that renewal is due after 10 years. It is our understanding that extended 10-year validity will apply only prospectively – i.e., after your current term ends, the renewal is likely to be granted for 10 years. Without such express order, an organisation will be taking a risk and hence we strongly recommend that you apply for renewal before 30^th September 2025.

Re 80G, present Finance Act 2025 does not have provision of 10 years, and hence will continue on the basis of 5 years.

Finance Act 2025 has already been passed in Lok Sabha and needs to be approved in Rajya Sabha, although being a money Bill it does not require mandatory approval of the Rajya Sabha.

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

Recently CBDT has notified most of the ITRs, after making changes, including ITR-7. These changes were notified on 9-5-2025. Major changes are highlighted below:

1. NPOs need to disclose several new information earlier not asked for in their ITR 7

1. Capital Gains Segregation Based on Date: As per the amendments introduced in the Finance Act, 2024, a major update has been made to Schedule-Capital Gains in ITR-7. Taxpayers are now required to report capital gains separately for transactions executed before and after July 23, 2024 — the date from which the revised capital gains rules came into force. This change is expected to affect how indexation and tax calculations are carried out.
2. Section 24(b) Reporting for Interest on Housing Loans:New fields have been added to capture deductions claimed under Section 24(b), improving disclosure on interest paid for house properties owned by these entities.
3. TDS Section Code Inclusion:Entities will now need to specify the TDS section code in the Schedule-TDS to enhance verification of tax deductions.
4. Under Para A20 of the ITR-7, details of registration under other laws (such as FCRA, Darpan, etc.) are required to be disclosed.
5. Voluntary contributions need to be disclosed between Domestic & Foreign, and under these broad division between Corpus & others. In case of Foreign Contribution (FC), one would also need to disclose purpose for which FC has been received.

2.  Due Dates for filing of ITR 7

1. For NPOs, including companies, required to undertake audit of their accounts, the due date remains the same as earlier, i.e. 31^st October 2025.
2. For NPOs not required to undertake audit of their accounts, normally due date is 31^st July, however this year it has been postponed to 15^th September 2025.

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

Foreign companies with Liaison offices, which till last year were required to file Form 49C within 60 days from year-end can now file the same in eight months from the year-end, i.e. by 30^th November. This has been done vide Income Tax (4^th amendment) Rules 2025. This extension provides additional time for LOs to gather and report accurate financial and operational details, aligning the compliance timeline more closely with other regulatory requirements. The amendment came into effect from the date of its publication in the Official Gazette. This is effective from the date of publication in the Gazette, i.e. 9-2-2025.

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

This amendment has been brought to bring into rules (through Notification) various changes brought in by FCRA Dept through a Checklist brought in by FCRA Dept for submitting various documents at the time of applying for registration.

Important ones are briefly summarized below.

Form FC3A (for registration amended)

• Last three years financial statements [Balance Sheet (B/S), Income & Expenditure (I&E) & Receipt & Payment (R&P)] and audit reports to be submitted along with the registration application. Earlier form did not specify this requirement.
• Year-wise activity reports for three years.
• I&E & R&P should reflect project/activity-wise expenditure. These statements should reconcile with each activity in the activity-wise report. If not, then submit a CA certificate giving such details and ensuring figures as per activity reports reconcile with the relevant I&E & R&P.
• Proforma affidavit format amended. It now requires each Board member to confirm that s/he is an Indian citizen, give OCI Card particulars if applicable, no conviction or prosecution pending.
• If NPO involved in publication related activities or if the Objects include such activities, then Chief Functionary needs to give an undertaking that no violation of S.3(1)(g) – reproduced below for ready reference

No FC to be accepted by association or company engaged in the production or broadcast of audio news or audio visual news or current affairs programmes through any electronic mode, or any other electronic form as defined in clause 2(1)(r) of the Information Technology Act 2000 or any other mode of mass communication.

• If any publication of NPO registered with Registrar of Newspaper for India (RNI, then obtain a certificate from TNI that it is not a Newspaper.

Form FC3B (Prior Permission) &FC3C (for renewal amended)

• Similar changes made in above forms, particularly relating to Proforma format.

Form FC4 (Annual Return)

• Purchase of new assets a Table has been added, requiring details of assets purchased.
• Details regarding movable & immovable assets, new Tables provided, requiring that figures should match with details in Balance Sheet.
• Chartered Accountants now are required to include in their own certificate project-wise opening & closing balances, alongwith project-wise receipt & utilization. This is quite onerous responsibility and will require Cas to spend substantial time in ensuring these figures.

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

Dear Members,

I believe by this time at least some of the FCRA registered organisations would have started filing their FC-4 return for FY 2024-25. When I tried to file the return of an organisation, I found some difficulties in filing in the newly formatted FC-4 format.

For example, under the heading 2. Details of utilisation of FC, there are 5 sub headings to be filled. In 2.1 Utilisation, the normal details of (i) Utilisation for projects as per aims and objectives of the person/association (Rs.), ii) Total Administrative Expenses as provided in Rule 5, FCRR 2011 (Rs.) and iii)Total Foreigners as key functionary/working/associated are normally filled. In the i) we fill the details of project related expenditure and in the ii) we fill the administrative related expenditures. Below that there is (c) Foreign Contribution transferred to other persons/Associations before 29.09.2020 (The Foreign Contribution (Regulation) Amendment Act, 2020), which also can be filled if we have made any such transfers. Then comes D) Total utilisation in the year (Rs.) (A+C) that gives the correct amount utilised during the year for project and administrative expenses put together.

But, in the next sub-heading 2.2 Utilisation – Project wise, the columns Sl.No., Name of project/ activity, previous balance, receipt during the year, utilised and balance appear and in this the utilised column restricts us to the project expenses mentioned by us in the previous sheet. Only if we include the admin expenses also, the correct balance amount in the year appears, otherwise it is showing an incorrect balance, as it gets polluted automatically. If we change the figure in the previous sheet indicating the utilisation for projects, including the admin expenses, then the second sheet shows the correct balance, but in the previous sheet, the figure given as Total Utilisation in the year becomes wrong, as the admin expenses get added double time.

I feel the FCRA support team should do something to rectify this technical error. Or, if there is any other way to rectify this with the currently available format, it may please be indicated to us.

Yours sincerely,

Subramania Siva
Coimbatore, Tamil Nadu.

Govt has brought out new Income Tax Bill 2025 to replace Income Tax Act 1961. While the overall Bill has a large number of provisions, SRRF has made a summary of impact of changes proposed in the new Bill for Non-Profit Organisations. These are summarised as below:

1. Consolidation and Simplification of Provisions

Unified Framework

a.   The Bill consolidates scattered provisions related to NPOs into a dedicated chapter XVII Part B, covering clauses 332 to 355. The Chapter is further sub-divided into seven sub-parts. This will enhance clarity.

Standardized Terminology

b. “Registered Non-Profit Organisation or NPO” would be the new term encompassing entities registered under Sections 12A, 12AA, 12AB or 10(23C), provided their registration is not cancelled. This will replace existing term like Trust, Charitable, NGO, etc.

2. Streamlined Registration and Compliance

Existing Registrations

c.  NPOs already registered under the current provisions need not re-register under the new bill. However new approvals under S.10(23C) will cease after 1-10-2024.

Structured Compliance

d. The bill introduces a structured approach to registration, taxation of income, permissible commercial activities, accumulation and compliance, etc. 

3. Revised Income Computation mechanism

New Income Definitions

e.    The bill introduces concepts such as ‘regular income’, ‘taxable regular income’, ‘deemed accumulated income’, and ‘residual income’ for NPOs. These definitions aim to provide a clearer framework for income computation.

f. Regular Income: consists of voluntary contributions consisting of general donations, rent from trust property, interest on trust funds, dividends from investments and income from incidental business activities. 85% application rule is generally calculated on regular income.

g.  Taxable regular income: Regular Income that is not applied to charitable purposes and is not validly accumulated. Any regular income which is neither applied, nor validly accumulated, becomes taxable at 30%.

h.  Residual Income: Total income of an NPO becomes fully taxable when the NPO violates certain core provisions of the Income Tax Act. These get triggered when an NPO

• Misapplies income (e.g. uses for non-charitable purposes),
• Engages in prohibited commercial activities (activities not incidental to main objects)
• Fails to maintain proper books of accounts
• Violates the terms of registration or approval
• Does not file income tax returns or audit report (Form 10B/10BB) within prescribed time.
• Fails to re-invest proceeds from asset transfers as required.

4.  Major Changes in case of treatment of capital gains

Capital Gains Treatment: Earlier S.11(1A) allowed NPOs to claim exemption on capital gains if the net consideration from the sale of a capital asset was reinvested in acquiring another capital asset, as this reinvestment of income was treated as application for charitable purposes. However under the proposed Bill this option is no longer available and such gains are to be considered under the standard 85% application rule of regular income, as net consideration is considered part of regular income of an NPO. Thus there is no deduction available to NPOs for capital gains, otherwise covered under the Income Tax for other type of assessees.

5. Restrictions on Commercial Activities

The Income Tax Bill explicitly prohibits NPOs from engaging in any commercial activity, except for activities that are incidental to their objectives.

6. Section 80G revisions

Deductions for donations under S.80G are now covered under Clause S.133, under two clauses of 100% and 50%. Most NPOs would fall under the 50% category.

7. Introduction of the ‘Tax Year’ Concept

The bill updates the terms ‘assessment year’ and ‘previous year’ with ‘tax year’, aligning with international tax terminology.

8. Effective date

Govt has promised to bring the bill to come into effect on 1-4-2026.

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

Dear Sir/Madam,

I am writing here to get some clarity on FCRA funds.

One society is having 2 FCRA bank accounts one utilization account in PNB(This was the old receipt and utilization account) which is currently the deemed utilization account. After opening the FCRA SBI New Delhi Account, the society has not received any FCRA donations. The SBI account does not have any balance in it. Today the society received a email stating that the due to no transactions in the account it will be marked inoperative.

Can we transfer some funds from the PNB account to the SBI account which will be utilized at a later date for the societies activities only.

Thanks in advance,
Noel Gole