A Presentation introducing the various ways of setting up an NGO, explicating the compliances and reporting under various acts along with their timelines. It also elucidates the recent amendments in the Foreign Contribution ( Regulation) Act, 2010 along, discusses the Finance Bill 2017 and Lokpal and Lokayuktas Act along with establishing an enhanced accounting and taxation outlook for the not for profit sector.

1. 24th February 2017
Financial Compliance
for NGOs – Webinar

2. ➜ To introduce the various ways of setting up an NGO, explicate all the compliances and
reporting requirements under various acts along with their timelines;
➜ To elucidate all the recent amendments in FCRA;
➜ Finance Bill 2017 and Lokpal and Lokayuktas Act and to establish an enhanced accounting
and taxation outlook.
Objective

3. Agenda
Impact of Budget 2017 on the NGO Sector
Various pathways to create an NGO
FCRA – Amendments, Compliances, Caution
MPT Act – Compliances and Reporting Timeline
Lokpal and Lokayuktas Act – Introduction and Reporting Requirements
Income Tax Act – Compliances, Caution Areas and Reporting Timeline
Internal Matters
Question and Answer Session

4. Impact of
Budget 2017 on
the NGO Sector

5. Restriction on exemption in case of corpus donation
by exempt entities to other exempt entities
It is proposed to insert a new Explanation to section 11
of the Act to provide that any amount credited or paid,
out of income referred to in clause (a) or clause (b) of
sub-section (1) of section 11, being contributions with
specific direction that they shall form part of the
corpus of the trust or institution, shall not be treated
as application of income.
It is also proposed to insert a proviso in clause (23C) of
section 10 so as to provide similar restriction as above
on the entities exempt under sub-clauses (iv), (v), (vi)
or (via) of said clause in respect of any amount credited
or paid out of their income. These amendments will
take effect from 1st April, 2018 and will, accordingly,
apply in relation to the assessment year 2018- 19 and
subsequent years.

6. Clarity of procedure in respect of change or
modifications of object in case of entities exempt
under sections 11 and 12
Where a trust or an institution has been granted
registration under section 12AA or has obtained
registration at any time under section 12A [as it stood
before its amendment by the Finance (No. 2) Act, 1996]
and, subsequently, it has adopted or undertaken
modifications of the objects which do not conform to
the conditions of registration, it shall be required to
obtain fresh registration by making an application
within a period of thirty days from the date of such
adoption or modifications of the objects in the
prescribed form and manner. These amendments will
take effect from 1st April, 2018 and will, accordingly,
apply in relation to assessment year 2018-19 and
subsequent years

7. Filing of Return within time allowed u/s 139(1) in the
case of entities registered under Section 12AA
It has been proposed to insert a clarificatory
amendment that entities registered under Section
12AA of the Act are required to file their return
within the time allowed under Section 139 of the Act
where the total income without giving effect to the
provisions of Sections 11 and 12 exceed the maximum
amount which is not chargeable to Income Tax.
This amendment will apply from 1st April 2018 i.e. AY
201-19 and onwards.

8. Restricting Cash Donations
1
• Under the existing provisions of section 80G, deduction is not allowed
in respect of donation made of any sum exceeding Rs.10,000, if the
same is not paid by any mode other than cash.
2
• It is proposed to amend section 80G so as to provide that no
deduction shall be allowed under the section 80G in respect of
donation of any sum exceeding two thousand rupees unless such
sum is paid by any mode other than cash..
3
• This amendment will take effect from 1st April, 2018 and will,
accordingly, apply in relation to the assessment year 2018-19 and
subsequent years.

9. Overview
Various Pathw ays
to Create an NGO

10. Various Ways to Establish an NGO
Society
Section 8
Company
Trust

11. PARTICULARS TRUST SOCIETY SECTION 8
Governing Statute Relevant State Trust Act
or Indian Trust Act, 1882
Societies Registration Act,
1860. Many states,
however, have variants on
the Act.
Companies Act, 2013
Registration Document Trust deed. Memorandum of Association
and/or Rules & regulations
Memorandum and
Articles of Association
Control Low Low High
Foreign Investment Tough Easy Easy
Members Required At least two trustees are
required to register a
public charitable trust.*
Minimum – Seven Minimum - Two
Cost factor Low Medium High
Comparative Analysis

12. PARTICULARS TRUST SOCIETY SECTION 8 PRIVATE
COMPANY
Change in Board of
Directors/ Trustees/
Members
Easy Easy Easy
Change of Registered
office
Easy Easy Easy
Transparency in
working
Low Low High - as everything is
available online.
Registration with
Income Tax u/s. 12A &
80G
Relatively Hard Relatively Hard Relatively Easier
Comparative Analysis

13. Hybrid Structure
•There is a growing popular belief that combining profit and
mission is an effective way of producing social wealth.
Despite these wide-ranging developments, hybrid
organizations remain poorly understood. As a result, legal
policy in this field has been haphazard and largely
ineffective. First, there is some uncertainty about the
extent to which business planners have the power to form
businesses that combine profit and social missions.
•A lot of not for profit Organizations are opening a Private
Limited Entity with a not for profit entity under the same
name.

14. Hybrid Structure

15. Amendments,
Compliances and
Caution
FC(R)A, 2010

16. W ays to Bring in Foreign Contribution

17. Registration
A person should
•Be registered under the Societies Registration Act, 1860 or
the Indian Trusts Act, 1882 or Section 8 of the Companies
Act, 2013 etc.;
•Normally be in existence for at least three years; and
•Should normally have spent at least Rs 10,00,000/- over the
last three years on its activities
•Submit copy of a details of Activities carried on during the
last three years.
Caution Points
Should not transfer fund to other organisations who are not
registered under FCRA without permission
Should not intermingle domestic funds with foreign contribution

18. Prior Permission
• be registered under the Societies
Registration Act, 1860 or the Indian Trusts
Act, 1882 or Section 8 of the Companies
Act, 2013 etc;
Registered
• submit a specific commitment letter from
the donor indicating the amount of foreign
contribution and the purpose for which it is
proposed to be given; and
Commitment
Letter
• submit copy of a reasonable project plan
for the benefit of the public for which the
foreign contribution is proposed to be
utilised.
Project Plan

19. Renewal
• Registration Certifica te renewa l
due a fter every five years.
• Organizations w hich w ere
registered before 2012 should
have applied for Renew al by
now
Documents
• The registra tion certifica te
under the sta tute of
incorpora tion.
• Cha rter Documents
• Copy of FCRA Registra tion
Certifica te which is being
sought to be renewed.
Renewal of Registration

20. Validity of FCRA Registration in respect of more than 11,000 associations
have been deemed to have ceased w.e.f 1st November 2016
A list of such associations have been put on www.fcraonline.nic.in since
these associations were not received by 30th June 2016
These associations however can file renewal application till online till 28th
February 2017 providing sufficient reasons for not applying renewal in
time.

21. An NGO can check
the validity of its
Registration
Certificate Online

22. S
No.
Old Provisions New Provisions
1 Applications of Registration (FC-3) and
Prior Permission (FC-4) filled online with
subsequent hard copy submission.
Form FC-3 for Registration & Prior Permission
– To be submitted online only.
2 Renewal of Registration Certificate
through Offline Form FC-5
Renewal through Online Form FC-3.
3 Hard copy of the applications - signed and
submitted with the Ministry.
Applications are now digitally signed -
uploading image of sign & stamp.
4 Hard copies of the attachments filed with
applications - to be submitted within 30
days of the online submission.
The self-certified copies of required
attachments are now scanned and attached
online.
Amendments in FCRA

23. S No. Old Provisions New Provisions
5 Fee paid through Demand Draft
/Banker’s Cheque - filed and submitted
with attachments.
Fee is now paid through online payment
gateway.
6 Correspondence with the Ministry made
through letters and personal visits.
Queries are now ordinarily handled through
emails and a monthly meeting with the
Director.
7 Offline Form FC-6, along with audited
statements of accounts by 31st
December every year.
Online Form FC-4 along with audited
statements of accounts by 31st December every
year.
Amendments in FCRA

24. S
No.
Old Provisions New Provisions
8 • If Registration or Prior Permission is
granted, and
• There is a receipt of Foreign
Contribution in a F.Y in excess of One
Crore rupees, or equivalent then
• Summary data on Receipts and
Utilization of the foreign contribution
to be displayed in the public domain
involving the year of receipt as well as
for one year thereafter.
• If Registration or Prior Permission is
granted, then place the audited
statement of accounts for F.Y on official
website or on the website as specified by
the Central Government.
• A person receiving foreign contribution in
any quarter of the financial year shall
place details of receipt within 15 days
following the last day of the said quarter
clearly indicating the details of donors,
amount received and date of receipt on its
official website or on the website as
specified by the Central Government.
Amendments in FCRA

25. Name
Address
Na ture, Aims or Objects
Ba nk/Bra nch/Account
Key Members*
Cha nges to
be reported
Cha nge needs to be reported within 15 (fifteen) da ys through filing of
Form FC- 6.

26. Compliances and
Reporting
Timeline
Maharashtra
Public Trusts Act

27. Filing of Budget
1
•If annual income exceeds 5,000/- for public religious trust
and 10,000/- in other cases
2
•Prepare a budget in the form of Schedule VII-A. File the
budget by 28th/29th February every year.
3
•Accounts need to be maintained through Schedule VIII
(Balance Sheet) and Schedule IX (Income and Expenditure
A/c)

28. Introduction and
Reporting
Requirements
Lokpal and
Lokayuktas Act

29. Important Points
1
• It shall apply to public servants in and outside India.
2
• Includes any person who is or has been a director, manager,
secretary or other officer of every other society or association of
persons or trust (whether registered under any law for the time being
in force or not) *
3
• *if the organisation is in receipt of any donation from any Foreign
Source under the Foreign Contribution (Regulation) Act, 2010 in
excess of Ten Lacs Rupees in a year or such higher amount as the
Central Government may, by notification, specify.

30. Disclosure Requirements
1
• Have to disclose their personal assets and liabilities.
2
• In case spouse is also required to file a return, he/she shall file a
return separately and mention the same in the said return. In case,
spouse has procured the assets out of his/her own income, it shall
still be mentioned in the said return.
3
• Immovable property includes property which has been inherited by
him/her.

31. A recent Office Memorandum dated 1st December 2016 states that there is no requirement of
filing the Declaration relating to Assets and Liabilities by the Public Servants as of now.
Previous memorandum dated 29th July, 2016 had postponed the last date for furnishing of
declaration/information/annual return relating to assets and liabilities to 31st December
2016. However, a recent memorandum clarifies that the government is in the process of
finalizing a fresh set of rules, and Public Servants shall have to file accordingly thereafter.

32. Compliance, Caution
Areas and Reporting
Timeline
Income Tax Act

33. Corpus Fund
1
• Donations made with a written direction from the donor that the
donation made shall be treated as part of the corpus of the trust are
not included in the total income of a trust or institution.
2
3
• Interest earned on investment of Corpus Fund will be treated as
income of a trust or institution. Such income may be applied to
charitable purposes, thereby saving it from income tax.
1
2
• It shall be shown separately in Schedule VC and Schedule J of ITR-7.
3

34. 1
• Section 11 of the Act requires a trust to utilize at least 85% of its
income for charitable or religious purposes, and the remaining
balance is permitted to be accumulated.
2
• If it is not possible to spend 85% of the income in the same year, then
a trust or institution may make an application to the Assessing Officer
in Form 10 for accumulating its income for future application to
charitable or religious purposes.
3
• Where income could not be spent on account of non receipt of
income, a new Form 9A may be used for income of any previous year
relevant to the assessment year beginning on or after the 1st day of
April, 2016
Utilization Of Funds

35. Commerical Receipts
1
• Sec 2(15) has significant implications and organizations falling under
the last category should be mindful of not having gross receipts from
trade, commerce or business in excess of 20% of the total receipts.
2
• Separate books are required to be maintained in respect of business
activities.
3
• Where the organization is engaged in various business activities then
separate books for each of such activities are required to be
maintained.

36. Schedule VC

37. Investment of Surplus Income
The organization must
apply 85 %of the income
derived from property
held under trust
including the amount
received as voluntary
contributions in the
previous year.
Explanation 2
to Section
11(1),
provides that
the income
will be
deemed to
have been
spent in the
previous
year.
Alternatively,
the assessee
can also
accumulate
the income for
5 years by
filing the
relevant Form.

38. INVESTMENT OF
SURPLUS
INCOME
Section 11(5)
Government
Saving
Certificates
Deposit in
PO, Saving
Bank A/c’s
Investment
in UTI
Investment
in
Debentures
Investment
in Bonds
Investment
in
immovable
property
Deposit
with IDBI
Investment of Surplus Income

39. Overview
Internal Matters

40. W hy should an NGO opt for Internal Control
COMPLIANCE
Compliance with
applicable laws and
regulations
FINANCIAL
REPORTING
Reasonable
assurance on
reliability of
financial reporting
OPERATIONAL
Effective and
efficient use of
resources

41. Framew ork
Receipt
Establishing agreements
between donor(s) and the
NGO.
Expenditure
procuring,
delivering,
disbursing,
accounting
and reporting
of aid
delivery.
Reporting
telling the
donors what
and how much
is needed, as
well as
acknowledging
receipt of aid
given.

42. Frequently Asked
Questions

43. Whether advisors who are not on Board are not covered
by Lokpal Act.
•Includes any person who is or has been a director, manager,
secretary or other officer of every other society or association of
persons or trust (whether registered under any law for the time being
in force or not)
Whether intermingling of funds from Domestic and FCRA
Bank accounts is possible?
•Strictly prohibited by the act.
•Opening of Utilization Bank account advisable
Is Equalisation Tax applicable on payments made to
Facebook/ Linked In etc
Normally, if the payment is in the nature of “Digital Ads”, the levy
would be attracted. Also Equalization Levy would not be applicable in
the following cases:
•If the payment made during the year is less than Rs 1 lakh
•If the organization making payment is registered in Jammu and
Kashmir

44. Is Statutory Bonus applicable to NGOs?
Section 32 (v)(c) says the Payment of Bonus Act, 1965 shall not apply
to the institutions (including hospitals, chambers of commerce and
social welfare institutions) established not for purposes of profit.
Is 80 G permanent?
80G Certificates issued after 1st October 2009 are permanent in
nature unless specifically withdrawn by the Department.
Is it necessary for a registered NGO which have not been
undertaking any activity to file any tax/financial
compliance?
Such NGOs are advised to file NIL ITR under Income Tax Act, 1961.
There may be other compliances depending on the act under which
the same is registered.

45. Question and
Answer Session

46. Thanks!
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