Income Tax
Income Tax - Registration
Procedure
Application for Registration
of Income Tax
In order to claim any exemption, an
NGO should make an application u/s 12A to the Commissioner of Income
Tax of concerned district for registration of the NGO. Such application
is to be made in Form 10A (given below). The following documents
are required to be submitted:
i) Form 10A (The application for registration
by an organization should have been made before expiry of one year
from the date of creation of an organization).
ii) NGO registration certificate under
which the organization is established and the Bye Laws & Memorandum
of Association
iii) Two copies of Accounts of 3 previous years should be enclosed.
Where the NGO was not in existence in any of three prior years,
copies of the accounts of lesser No. of years may be submitted.
Implications of delay in making
application
Any delay in the filing of application
for registration by the organizations cannot be ignored by the Commissioner
of Income Tax. The exemption shall be given from the 1st day of
the previous year in which the application was made and if the organization
has any income in the previous years prior to filing the application,
shall be subject to tax. Thus the onus of availing exemption of
Income from the Income Tax Department lies on the organization itself.
The Authority to whom Application
Is to Be Made
The application is to be submitted Income
Tax - Registration Procedure to the Commissioner of Income Tax in
whose area the NGO is located. However, in respect of the four metropolitan
cities of Kolkata, Chennai, Delhi & Mumbai, the applications
are to be made to the Director of Income Tax (Exemption).
Granting & Refusal is
possible in following case
The Commissioner of Income Tax, on receipt
of an application for registration of an NGO, shall call for such
documents or information, as he thinks necessary. While processing
such application, the concerned authority normally concentrates
on the genuineness of the NGO. Once the genuineness of the activities
& creation is established, then it is incumbent upon the authority
to pass an order in writing, registering the NGO.
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Tax exemptions structure of
NGOs
Charitable Purpose Eligible
for Tax Exemptions
As per the Sec 2 (15), Charitable Purpose
is four types of activities such as (1) Relief of the poor (2) Formal
education (3) Medical relief (4) Any other object of general public
utility. These are called as four limbs of charitable purpose as
follows.
Relief of the poor
Any Activity which directly helps poor
such as food, shelter, clothing, emergency help etc fall under this
category. The activities must be targeted towards the economic situation
of poor communities.
Education
The word education includes mainly formal
schooling or training. Coaching institutions are not allowed in
the said term. However, education need not be given only to the
poor. Also, it does not have to be provided free of charge or at
lower costs.
Medical Relief
This covers the establishment of hospitals
etc to cater to the needs of the ill. Once again, the hospitals
need not cater to the poor alone or at reduced rate. However, in
practice, a charitable disposition towards the needy is normally
expected.
General Public Utility
It includes any activity which is seen
a useful and worthy of promotion by the society. A large number
of modern NGOs which are engaged in research & advocacy, empowerment,
social justice and other civil society initiatives get the exemption
under this fourth limb.
No Tax for Charities
Under the Income Tax Act 1961 (I T Act),
charitable organizations (whether trust, society and section 25
of the company) in India are not liable to any income tax, provided
certain conditions required under law are fulfilled. As per the
section 11(1) (a) to (c) as well as 10(23C) of I T Act the term
NPO includes religious organizations such as temples, churches,
mosques etc and charitable organizations such as educational institutes,
hospitals, NGOs etc. Organization may qualify for tax - exempt status
if the following conditions are met:
A. At least 85% of the income derived
from property held under trust, should be applied to charitable
or religious purposes in the relevant previous financial year in
order to claim full tax exemption. Property of trust also includes
a business undertaking held under trust. U/s 10 (23C) (iv) or (v)
The application for exemption has to be made by charitable and religious
organization in the prescribed form No 56 (given below)
B. Surplus income for which an application
has to be made in Form No. 10 (given below) may be accumulated for
specific projects for a period ranging from 1 to 5 years;
C. The property should be held under
trust wholly for charitable or religious purposes.
D. No part of the income or property
of the organization may be used or applied directly or indirectly
for the benefit of the founder, trustee, relative of the founder
or trustee or a person who has contributed in excess of Rs. 50,000
to the organization in respective financial year;
E. The organization must timely file
its annual income return, immediately after the expiry of each financial
year.
F. The income must be applied or accumulated
in India. However, trust income may be applied outside India to
promote international causes in which India has an interest, without
being subject to income tax.
G. Income from such property should be
applied to charitable or religious purposes. (Exemption is available
to the extent of such application)
H. The assessee is to apply for registration
in Form No. 10A (given below) in duplicate before the expiry of
1 year from the creation of trust.
I. The funds of the organization must
be deposited as specified in section 11(5) of the income tax Act
o Investment in Government Savings Certificates and any other securities
or certificates issued by the Central Govt. under the Small Savings
Scheme;
o Deposit in any account with the Post Office Savings
Bank Account;
o Deposits in any account with any scheduled bank
or a co-operative society engaged in carrying on the banking business
(including a co-operative land mortgage bank or a co-operative land
development bank);
o Investment in units of the Unit Trust of India
o Investment in any security for money created
and issued by the Central Govt. or a State Govt.
o Investment in debentures of any company or corporation,
the principal whereof and the interest whereon are guaranteed by
the Central or State Government.
o Investment or deposit in any public sector company.
o Deposit with or investment in any bonds issued
by a Central Government approved financial corporation engaged in
providing long-term finance for industrial development in India.
o Deposits with or investments in any bonds issued
by any Central Government approved public Company formed and registered
in India with the main object of carrying on the business of providing
long-term finance for construction or purchase of houses
(I /1) w.e.f. 01.04.2001, deposits in bonds issued by a public company
engaged in long term finance for development of urban infrastructure.
| |
Income / level Slab |
Income tax rate |
i.
|
Where the total income does not
exceed Rs.1,50,000/- |
NIL |
ii.
|
Where the total income exceeds Rs.1,50,000/-
but does not exceed Rs.3,00,000/- |
10% of amount by which the total
income exceeds Rs. 1,50,000/- |
iii.
|
Where the total income exceeds Rs.3,00,000/-
but does not exceed Rs.5,00,000/- |
Rs. 15,000/- + 20% of the amount
by which the total income exceeds Rs.3,00,000/-. |
| iv. |
Where the total income exceeds Rs.5,00,000/-
|
Rs. 55,000/- + 30% of the amount
by which the total income exceeds Rs.5,00,000/-. |
Forms
Application
form for sec 12- A_form No 10A
Form 10
Form 56
|
