Expenditure of more than Rs. 20000 in Cash

FCRA advisory committee has issued a circular for all the NGOs having registration of FCRA to spent expenditure of more than Rs. 20000 only by way of CHEQUE or DEMAND DRAFT. This means any CASH Expenditure for more than Rs. 20000 is not advisable as per this circular. The circular issued by FCRA department is attached here.

Let us get into the details.

Why such circular ?

FCRA department has mentioned in the circular that, they have observe many organizations has spend or withdraw huge cash from FCRA Bank and Utilization account.

Is there any provision in FCR Act 2010 ?

As such there is no specific section in the FCR Act, 2010 for limiting expenditure in cash. FCRA Department has given reference of Sec 40a(3) of Income Tax Act for dis-allowance of expenditure of more than Rs. 20000. However in my opinion that section is applicable to only business income and not grants.

Consequences if spent expenditure for more than Rs. 20000

FCRA department has made it clear in circular that in case of payments expenditure of more than Rs. 20000 by CASH, such associations are likely to require more intensive scrutiny by Government

What NGO has to do?

Try to make all the payments and expenditure of more than Rs. 20000 by crossed payee cheques or demand draft.

However, in practicality, sometimes NGO has to pay by CASH. In such circumstances there must be valid reason for that and NGO has to keep record for such explanation. So that in case of scrutiny, NGO can put its valid reasons before authorities. (It is author’s personal view)