Socio Research & Reform Foundation

A society registered under society act is running a educational institution.It is not yet registered under Sec 12A of Income tax act. In f y 2020-21 its revenue fee receipts from school are less than 1cr and after claiming all revenue expenses and depreciation there is loss in income and expendture account.It has received corpus donations worth Rs. 6 cr for builing and 90% of its corpus donations has been utilised for construction of school building.

Whether society can claim exemption u/s 10(23)(c) as its revenue receipts are less than 1cr.Whether whole of corpus received will be exempted .Which ITR FORM it is required to file ITR 7 OR ITR 5.

CA Arvinder Pal Singh

CBDT has extended the due date for the filing of various reports of audit under the provisions of the Income-tax Act,1961 (Act), in respect of the following compliances:

1. The due date of furnishing of Report of Audit (Form 10B) forNPOs for FY 2020-21 (which was earlier postponed to 15^th January 2022 has now been further extended to 15^th February, 2022;
2. The due date of furnishing Income Tax Return (ITR 7) for NPOsfor FY 2020-21 (AY 2021-22), (which was earlier postponed to 15^th February 2022 is hereby further extended to 15^th March, 2022;

Please click here to see the detailed Circular.

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

Dear Sir,  

We have following queries regarding FCRA :

1. Can advances be given to Project staff for expenses to be incurred in the field, If not, what is the remedy when the expenses can not be paid directly to the party.

2. Whether we can pay expenses of FCRA  nature from institutions/branches  & reimburse them back from FCRA. 

3. Are Statutory liabilities( PF, ESIC) compulsory to be paid from FCRA for FCRA project employees, or can be paid from non-FC & later reimbursements from FCRA.

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Thanks & Regards

Abhijeet
Vidya Bhawan Society

We are so happy to inform all of you all that Ministry of Home Affairs has extended the validity of FCRA registration certificates to 31^st March 2022. It is applicable to all those entities whose registration initially was due to expire between 29-9-2020 to 31-3-2022 (Notice: No. II/21022/23(22)/2020-FCRA-III, Dated 31^st December 2021). However the entities should have applied for renewal before their original expiry date.

The Extension letter has also clarified that in case of refusal to renewal, the entity cannot receive or utilize the funds after the date of refusal.

(click here for FCRA Notification)

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

Some of you may have heard news that as per a recent decision, Grants are to be covered under GST. SRRF Dialogue examines the case and its implications.

 Jayshankar Gramin Va Adivasi Vikas Sanstha, (referred to as JGAVS)an NPO is registered under Maharashtra Public Charitable Trust Act and having S. 12AA registration under Income Tax Act. It requested Authority of Advance Rulings of Maharashtra (AAR-Maharashtra) to decide if GST is applicable on its activities, considering under the GST Exemption Notification (12/2017 dt 28-6-2017) exempts Charitable Activities of a NPO registered under S.12AA of Income Tax Act.

The GST Exemption Notification has defined Charitable Activities as follows:

It is obvious that the above definition does not cover a large number of activities that most NPOs undertake.

Activities of JGAVS

JGAVS receives monthly grant of Rs 2000/- per child from the State Govt for 50 orphans and homeless children for providing shelter, education, guidance, clothing, food and health for these children. It also provides legal and other support services to destitute women suffering from domestic violence for which it receives Grant from the central Govt. It also receives donations.  

It felt its activities are covered under iii(A) & iii(B) of Charitable Activities as defined under the Exemption Notification given above and filed an application with AAR-Maharashtra to decide if its income falls within the scope of GST.

The AAR stated that while the NPO
(a) provides for the care, shelter and education of orphans it is not specifically covered under the Exemption Notification, as it only covers Educational programmes or skill development and not other aspects.
(b) similarly, in case of destitute women, it stated that legal and other support  services are not covered by the definition given in the Exemption Notification.

Thus AAR decided that activities of the NPO are not covered by the Exemption Notification. We believe this is a very narrow interpretation of the Charitable Activities as defined in the Exemption Notification. However it is clear that, this interpretation, further narrows down the scope of activities for NPOs which can be covered under the Exemption Notification.

AAR also stated that an NPO undertakes a number of activities, and all other activities undertaken by an NGO that are not covered by the Exemption Notification would be subject to GST. Thus an important clarification, that relying on Exemption Notification for exemption may not be very beneficial for NPOs.

The AAR authority has further deliberated on the definition of ‘Supply’, which is the basis of charging of GST.

Definition of ‘Supply’

S. 7 (1) states that Supply includes: (a) All forms of supply of goods & services or both, such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course of furtherance of business,

The most important para from the Order which covers applicability of GST on NPOs, based on various definitions under the Statute.

“In order to arrive at a definitive conclusion on the taxability of service, the main ingredients which need to be necessarily present, as per GST statute, are the service (supply), the service provider (supplier), the service receiver (recipient) and the consideration for the service. In the instant case, if we refer to definition of “supply” (which is very much exhaustive), it covers almost all activities of the applicant. Moreover, definition of “consideration” includes grants and excludes only “subsidy”. The profit motive is not important, if we make combined reading of all above definitions, including that of “business”.

Hence it has basically concluded that considering all the definitions under GST statute, activities of an NPO would be covered under GST.

This order of AAR, Maharashtra has put all the NGOs in a very difficult situation, since if courts also hold the same view than, all NGOs would need to pay GST on all their supplies (in simpler terms all activities other than donations without consideration) since July’2017, date of applicability of GST, a very worrisome thought.

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

These are uncertain times for most NPOs registered under FCRA. Last time most NPOs FCRA was renewed on 31^st Oct 2016 or a date close to it, hence as per rules, FCRA was to expire five years later on or around 31^st Oct 2021. Dept realizing that it would not be able to renew in most cases, extended the validity of FCRA certificates upto Dec’ end.

Now many are again feeling apprehensive, as very few FCRA renewals are trickling in. And considering the process that FCRA Dept follows, it will be quite difficult for the Dept to issue all organizations FCRA renewal by Dec-end. What can NGOs do – well uncertainty, particularly due to FCRA, has become part of life for most NPOs, and they have got used to it.

Looking at the past precedent, it is quite possible that the Govt may again extend the validity of FCRA registration – a most likely outcome. Some of the questions being raised.

Can NGO use FCRA funds lying with it as at 31-12-2021, after this date ?

• If FCRA date is extended, yes Funds can be used.
• If FCRA date is not extended and no rejection letter rec’d, that means FCRA though expired, however since FCRA Renewal application has been made and not rejected, FCRA funds can be used in normal course. This was the precedent even at the time of 2016 renewal, when the Dept allowed people using FCRA fund, after the FCRA expired and was awaiting renewal. Though you may face problem if banker does not allow you to withdraw funds. Then only recourse open will be to go to FCRA Dept with a suitable application.
• If FCRA date is not extended, and Renewal application not filed before expiry date. Then the NGO is in big soup, as it would mean FCRA deemed to have ceased (rule 12(6)), which means all funds and assets lying with the NGO get vested with the Govt. In such cases the NGO can neither receive nor utilize FCRA funds.

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

The issue of receiving proceeds from non-FCRA sources has always been a prickly issue, as often bankers do not allow remittances from local sources to be deposited in the FCRA bank account.

SBI has now started allowing deposit of proceeds generated from local sources in FCRA bank account, on the condition that the depositor provides a Chartered Accountant certificate to the effect that the assets in question were procured from FCRA funds.

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

As many of you, particularly from Maharashtra region, would be aware that each Charitable Trust / Society needs to submit their Annual Return within 15 days after 30^th September. However due to Covid, Govt of Maharashtra has been extending this date, initially to 30^th November and now the same has been extended to 31^st December 2021.

Charity Commissioner has brought out a circular No. 591/2021, dated 26-11-2021 extending the date to 31^st December 2021.

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