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I NCOME TAX 2 NPO TAXATION 12A • Receipts > 1.5 lakh • Required • No tax on Income 80G / 35AC TDS • Raising Funds? • Optional • Tax deduction for donors • Large Payments? • Compulsory • Deduct & Deposit Tax PAN / TAN 3 Permanent Account Number (PAN) Form 49A Apply before filing return 7-10 days Tax Deduction Account Number (TAN) Form 49B Apply when deducting Tax 12A E XEMPTION C ONDITIONS 4 Charitable activities Minimum spending 85% Arm’s length transactions with key persons Keeping funds in approved modes Filing tax return annually U NSPENT F UNDS ? 5 Upto 15% • Indefinite Accumulation Temporary under-spending • Use up next year • Carry forward Letter Long Term Project • Accumulate up to five years • Form 10; Board Resolution 6 K EY P ERSON PAYMENTS Key Persons? Payments? Care? Implications • Managers, Trustees, Board Members, • Large donors • Related parties • Salary, etc. • Use / sale / purchase of property • Identified and approved • Disclosed – form 10B • Reasonable • Loss of Tax Exemption A NNUAL TAX R ETURN 7 Due Date • 30th September Penalty • Rs. 100 per day Enclosures Form? • Audited Consolidated Accounts • Form 10B with annexure • TDS Certificates • Carry forward letter etc. • ITR 7 N EW ITR 7 8 Revised Form Information Sought • ITR 7 • Sec. 2(15) • Objects of general public utility? • Business Activities? • Business Turnover? • FCRA • Registration? • Amount Received? A UDIT R EPORT 9 Form Prepared by Shows • 10B • Auditor • Amount • Spent (incl. fixed assets) • Set apart • Carried forward • Payments to key persons D ONATIONS 80G A PPROVAL 11 Donor’s Benefit • 50% deduction from taxable income Validity • Lifelong Form Documents needed Cash Donations • 10G • • • • 12A registration Trust Deed / Bylaws Audited Accounts (up to 3 yrs.) Activity Report (up to 3 yrs.) • No deduction to donor above Rs. 10,000 35AC A PPROVAL 12 Donor’s Benefit • 100% deduction from taxable income Validity • 3-5 years • For specific project only Formalities • Apply to National Committee (Form) • Issue certificate to donors (58A) Documents needed • • • • • • 12A registration Trust Deed / Bylaws Audited Accounts (up to 3 yrs.) Activity Report (up to 3 yrs.) Project Proposal Project Budget 13 A NONYMOUS Problem Section Applies to Restriction Impact Solution DONATIONS • Donors w/o name and address • 115BBC • Wholly Charitable Organisations • Higher of 1 lakh or 5% of donations • Pay tax @ 30% on excess • Encourage cheque donations • Record donor’s name and address S PECIAL I SSUES B USINESS -L IKE A CTIVITIES 15 16 T HE C HARITABLE T RUNK 12A 80G 35AC Donor Incentives 10(23)(c) I Tax Exemption Charitable Purpose S EC . 2(15) 17 Relief of the Poor Conventional Education Medical Relief Charitable Purpose Environment Modern Monuments / Culture Dynamic Other useful purpose Business ≤25 lakh D EALING 18 WITH 2(15) Ensure business is Incidental Gross revenue ≤ 25 lakh If not, spin off as a separate organisation Form of organisation? For-profit forms NPO w/o tax exemption I NCIDENTAL B USINESS 19 Incidental? Only activities connected with main objects Gross Business Turnover Any amount for first five categories ≤ 25 Lakh for Sixth Category 20 B USINESS : A CCOUNTING / A UDIT Separate books of account – sec. 11(4A) Attach Audited P&L A/c Transfer profit to main I&E A/c Form 3CD audit report if Fees Turnover > 25 lakh Sale Turnover > 1 crore F URTHER R EADING 21 Accountable 15 : Basics of Tax Registration Accountable 16 : Income Tax Return Accountable 91 : Income Tax Exemption Accountable 141 : Charitable purpose and Income Tax Auditable 2 : Charitable Purpose - 1 Auditable 3 : Charitable Purpose - 2 Accountable 142 :Eleventh Commandment Accountable 143 : Taxation Tricks and Traps Auditable 12 : Taxing NGO Programs Outside India