Clarifications – Form 10BD Donation Return

What is Form 10BD?

From FY 2021-22, Income Tax has made it mandatory for NGOs – registered organisations having 80G certificate to file “Donation Return” in form 10BD. There was no mechanism for the Income Tax department to cross check donation exemption claim by individual assessee. Also, it was observed during scrutinies of income that many false claims made by Assessee to get tax exemptions u/s 80G.

So, to streamline the whole process and automate the same, Income Tax introduced the donation return in Form 10BD. Under this return, NGO has to fill all the information related to donations before 31st May of previous financial year. Once return has been processed, NGO can download the Donation Certificate in Form 10BE and issued to individual donors. Also, the information of donation then will reflect in the 26AS of the individual assessee.

Last Date of filling Form 10BD

Last date for filling Form 10BD for the FY 2021-22 is 31.05.2022 (as of now)

How to file Form 10BD?

Form 10BD donation return is to be filed online by the NGO. Watch this video providing live demo on how to file donation return.

Clarifications on some of the issue of Form 10BD

Q:1 Should we include secret donation here?

A:1 No, secret donation or “Anonymous Donation” should not be included in this return. However, NGO should make sure that the donor then will not claim exemption in his individual return. Also, the limit of “Anonymous Donation” as mentioned in sec 115 BBC must be kept in mind.

Q:2 Should we include cash donations more than Rs. 2000?

A:2 As per section 80G 5(d), cash donation limit is up to Rs. 2000/- Thus, any donation above Rs. 2000 in cash is not qualify for 80G exemption and thus, it is not advisable to mentioned here.

Q:3 What about Foreign Grants?

A:3 Any specific grants – CSR, Indian, Government, Foreign Grants must be include here in this form 10BD. In case of Foreign Grant, Foreign Country Tax Identification Number of entity must be mentioned under ID Code 03.

Q:4 Whether we should include Donation in kind and how to value it?

A:4 This depends on whether donation in kind accounted for in your books of accounts or not. If you are taking donation in kind in your books, same should be included here. As there is no clear rule in Income Tax on how to value donation in kind, justifiable value should be taken. Justifiable value means the value you can justify to Income Tax Officer. For this in the form, ‘mode of receipts’ is to be selected as “(b) in kind”.

Q:5 What about “Donation Box?

A:5 Any amount received in the donation box is considered as “anonymous donation” and treatment is as mentioned in the Answer-1 above.

Q:6 Will this return data should match with the figures mentioned in the ITR of NGO?

A:6 We are not sure about whether the information of Form 10BD is going to cross check with ITR of NGO by Income Tax Officer or not. But it is highly advisable to present your financial statements (Income & Exp account) in such a way that all the figures mentioned in the Form 10B must match with the books of accounts.

Conclusion

Let us know if you have any doubts or questions in this regard in the comment section below.

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Trust Registration Certificate Sec 12A (New Sec 12AB) Provisionally Approved

Once you filled Form 10A as mentioned in the below video, you will be received the system generated email approving your Trust Exemption Registration u/s 12A PROVISIONALLY. Later you will be received URN.

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FCRA – GAME OVER ?

The Foreign Contribution (Regulation) Amendment Bill, 2020, introduced in Lok Sabha by Home Minister Amit Shah today at 3 pm, says the need to strengthen the Act has arisen due to several organisation “misutilising or misappropriating” the funds leading to the government cancelling 19,000 such registrations in the past few years.

1) Mandatory to open FC Bank in SBI-Delhi Branch

Amendment of section 17 of the ACT has sought to provide that every person who has been granted certificate or prior permission under section 12 shall receive foreign contribution only in an account designated as ‘‘FCRA Account’’ which shall be opened by him in such branch of the State Bank of India at New Delhi, as the Central Government may, by notification, specify. It has, however, allowed the organisation to transfer these funds to another account for utilisation.

2) Slashing Administrative Expenses further

It is proposed to slash administrative expenses further from 50% to 20%. This will be the harsh step for NGOs. Already the definition of Administrative Expenses is very vague and no clarity over which expenses should be include or not.

3) AADHAR CARD for Board / Office Bearer

It is proposed now that AADHAR is mandatory for all the office bearer and board members. Earlier FCRA has already introduced to submit an affidavit by each board members. That affidavits is almost like a had-cuffs. One more step by making AADHAR mandatory to demotivate person to be on the board of the NGO.

4) No more Transfer of FC Funds to other NGO

Now, no more transfer of FC funds to any other organisation. Means, no Networking no sub-grant. However, more clarity is required on this.

5) And some more restrictions

Also, a “Summary Inquiry” is proposed by government, wherein FCRA department can freeze your funds even in the middle of the Project.

Full Blog

Read Full blog here

FCRA-Amendment-2020Download

The Conclusion

The important question here is – Is this beginning of the end?

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Big Relief – Renewal of 12A and 80G is being deferred

The Taxation And Other Laws (Relaxation And Amendment Of Certain Provisions) Bill, 2020 as introduced in Lok Sabha on 18.09.2020 seeks to replace the Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance, 2020 and further to amend the Income-tax Act.

The Full bill is attached here.

Taxation-and-Other-Laws-Relaxation-and-Amendment-of-Certain-Provisions-Bill-2020Download

A new section was introduced Sec 12AB in the Finance Act 2020 requiring every existing organisation registered u/s. 12AA and 80G to re-register themselves. Now, dut to COVID-19 pandemic, the insertion of this new section 12AB is being deferred to 1st April 2021.

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Sale to Foreigner deposited in FC or NonFC Bank?

Example

One of the NGOs is making handicraft items and exporting it out of India. Also, sometime foreigner visits their campus and buy such articles. Where should we deposit the sale proceeds of such transactions ? FC Bank or NonFC Bank?

Solution

So, when sales made to foreigners or exporting to foreign countries, such is purely a commercial transaction. Here there is no charitable transaction. As per the Explanation 3 of Section 2(1)(h) of FCRA, 2010 while defining “Foreign Contribution”, this type of commercial transactions are clearly excluded.

“Explanation 3 ‒ Any amount received, by an person from any foreign source in India, by way of fee (including fees charged by an educational institution in India from foreign student) or towards cost in lieu of goods or services rendered by such person in the ordinary course of his business, trade or commerce whether within India or outside India or any contribution received from an agent or a foreign source towards such fee or cost shall be excluded from the definition of foreign contribution within the meaning of this clause.”

Thus whatever received from sale of product to foreigner must be treated as revenue under the NonFC Books and deposited in NonFC Bank Account

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Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

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New TDS Rates applicable to NGOs after COVID-19

Applicability of TDS to NGOs

It is a misconception that TDS not applicable to NGO because NGO is exempt from Tax if registered u/s 12AA. TDS is liability for NGOs to deduct from the certain payments made and deposited within time to the Government account. So NGO is not exempt from deducting TDS only because registered u/s 12AA.

TDS Transactions

There are many transactions which covered by TDS provisions, however in NGO mostly following transactions are usually takes place on which TDS is applicable. Let us check it out.

  • TDS on salary
  • TDS on Consultancy
  • TDS on Contract
  • TDS on Technical Services
  • TDS on Rent

New TDS rates after COVID-19

Because of COVID-19, along with many economic reliefs, Government has decided to slash the TDS rates. For New TDS rates, watch below video.

https://youtu.be/pszH1IlzLeE

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Can NGO issue Bill / Invoice to Corporate for CSR porject?

If you are implementing CSR project and at the time of releasing instalment, corporate asked you to raise a Bill / Invoice and only after that instalment will be released, can you issue Bill or Invoice as a Non Profit Organisation?

The Corporate Process

Corporate Financial Process do not allow any payments without bill. And thus the person handling finance and accounts in corporate would force Non Profit Organisation to issue invoice or bill in support of release of the first instalment. They do not get it why NGO can not issue bill if they are in receipt of money.

So, What is the Solution?

First thing first, you need to convince the corporate that NGO can not raise the bill for the grant instalment. Secondly, CSR agreement is enough for the supporting document to release the instalment.

However, NGO can issue Claim Statement or Money Receipt Statement or any such kind of documents demanding instalment of CSR but do not issue Bill, Invoice, Credit/debit Note etc..

Watch video here

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Participant List mandatory for NGOs?

Many auditors and funding agency / donor agency asked for whether participant list is maintained by the NGOs or not. Is participant list is considered as proof for amount spent. Why participant list has so much importance.

Participant List

As name suggests, Participant list basically is the statement or list showing the attendance of participant / beneficiaries. So, whenever, some trainings, meetings, distributions etc event happens, it is important to document number of person attended such event.

Supporting / proof of Expenditure

During the event, some of the expenditures spent are based on the number of person attended it. Food Expenses, Refreshment expenses when paid on per meal or per person basis. In such scenario participant list can be work as internal supporting proof for expenditures. However, it must be noted that external supporting or primary supporting like bills and invoices for food and refreshment must be taken.

Structure

Participant List must have following information

  • Serial Number
  • Full Name of Participant
  • Village / Town / Location
  • Contact Number
  • Signature
  • Authorised Signatory

Format

Illustrative format of Participant List

Video

Check out below video on participant list

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Is it mandatory to quote Voucher Number on Each Voucher in NGO Accounting

Voucher Number

A number serially entered on any voucher is much help in the accounting system. As a Fundamental of Accounting, it is required that all vouchers must be properly numbered in the physical vouchers as well in the books of accounts.

System of Numbering

There are various methods for numbering vouchers – serially numbered – 1,2,3….., monthly numbered – Apr1, Apr2 , nature wise numbering – for Cash Payment CP1, CP2, …. etc.. However, the objective of having voucher number is more of control purpose. Once entered in the books, it prevents any change into it.

Problems of Voucher Numbers in NGO Accounting

The major problem is faced when NGO maintains accounting Project-wise. Means, for each project separate Tally, is maintained. Also, when cost-centres or cost-categories are used in Tally for Project Accounting, same kind problems are faced. Also, in NGO Accounting, vouchers and supporting come from field and if voucher numbers used serially, it creates pronblem in sequncing.

Video

Check out my below video to find out the answer.

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