FCRA UPDATES – Huge Relief

Many organizations have lost their registration during the last few years for the reason of not filling FCRA return online. Time to time FCRA department had given many opportunities to such NGOs to file their returns. Many organizations were not even aware of filling returns online and sent hard copies of returns, which were not taken on record by FCRA.

As per the provisions of FCRA, if registration is cancelled, one can apply only after three years. However, major relief announced today by FCRA department for such organization, whose returns are pending. They can now file pending returns online and can apply for renewal within three months of this notice. Thus the last date is 31.10.2019.

Not only this but penalty leviable on such non-filling is also waived.

Download the notice from here.

This is not applicable to the organisations which are regular in filing annual returns and have filled all returns online.

Did I miss something?

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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Confusion about Honorarium and Statutory Compliance

Confusions

Is TDS applicable on honorarium?

Should we deduct PF from honorarium?

Is honorarium considered equal to salary?

Does honorarium will consider as fees or consultancy

How to deduct professional tax from Honorarium?

Lots of confusion regarding honorarium and there is no statutory implications given in the Acts rules and define clearly what is honorarium however below is the dictionary meaning of honorarium

An honorarium is a small fee paid for a service that is usually done for free. It’s more of a thank you than a real, substantial paycheck.

 

It is clear from the above definition that the amount should not be substantial but a small fee is to be considered as honorarium. However, we have seen so many organisations in the budget using this word for the purpose of staff payments. And thus the confusion arises, is it treated as salary or should it consider as consultancy fee?

Irrespective of wordings of Approved Budget, it is highly recommended to look into the rules and regulations of the Act. Let us clear one by one with the statutory act applicable to it.

 

Income tax

As per the income tax Act, there is no word define as “honorarium”. But it is sure that honorarium should be considered as Income and person receiving it should pay tax on it if applicable.

TDS

TDS is a liability on NGO to deduct from the payment to staff if limit crosses. The honorarium is no exception. Need to deduct TDS on it either as a salary or as consultancy, depending upon agreement/appointment letter/contract between staff and NGO.  Thus TDS is to be deducted on honorarium if treated as regular salary (sec 192), as per basic exemption limit stated in the Income Tax Act of relevant Assessment Years. If honorarium treated as consultancy(sec 194J), then deduct TDS at 10%, if basic limit crossed.

Check out this TDS chart:- https://www.incometaxindia.gov.in/Pages/charts-and-tables.aspx

But do not consider it as a contract and deduct as 1% u/s 194C.  Honorarium can not befall under the definition given in section 194c.

Provident Fund

PF authorities always considered Honorarium as Salary. If your organization falls under the PF Act, and regular payments are made to the staff, PF should be deducted and paid.

Professional tax

Even professional tax authorities consider the Honorarium as Salary and asked to deduct Professional Tax.

Conclusion

So, Honorarium is very very vague word And need more clarification. It is advisable to make it very clear that payment to staff is either in the form of Salary or Consultancy Fees irrespective of the wording used in the approved budget.

Have doubts or want to share your thoughts, write in the comment section below.

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How to remove GHOST FIXED ASSETS – Fixed Assets Management in the NGO

Scenario

30 computers were purchased out of funding agency fund during 5 years of projects. Now in the current date, almost every computer is not usable. How do you remove these assets from the  Balance Sheet? This is very important query asked by participants every time I take Training on Accounting and Financial Management of NGO.

As we know NGO is a special type of Entity and rules and regulations governing them are not very clear. Also, there are no accounting standards issued by ICAI specifically related to NGO covering each and every aspect. All these make more confusions. (Why it is very important to clean your Balance Sheet – Read Here).

Let us discuss today how to remove ghost assets from the Balance Sheet.

When Assets should be removed?

Fixed Assets can be removed in the following cases :

  1. if Fixed Assets are not in use
  2. if maintenance expenses are very high
  3. due to change in technology requirements
  4. if Funding Agency instructed to return it back or transfer to another partner

Procedure to remove Fixed Assets

Before that, we need to know the source from which it is acquired. Fixed Assets are generally acquired by NGO in two ways.

1) From Restricted Funds. (Funding Agency Budget etc…)

2) From Unrestricted Funds. (Corpus, General Donation, Interest etc..)

Step 1 Identification

Before 31st March every year, a committee should be formed comprise of Accountant and other two people who then take the stock of Assets and decide which can be scraped or removed or discarded.

Step 2 Approval

On their recommendation, Head of the organisation decides whether to go ahead and remove fixed assets or not. In case of assets acquired from the Funding Agency Fund, written approval must be obtained from the Funding Agency.

Step 3 Passing Resolution

It is highly advisable to put an agenda in the General Meeting regarding removal/scrape/sale of fixed assets. Once approved, a resolution to remove Fixed Assets should be passed in the board/general meeting.

Step 4 Accounting Entries

After passing the resolution, an accountant should pass appropriate journal entry in the books of accounts for removal/scrape/sale of fixed assets recognizing profit or loss if any. Journal entries depend upon how it was recorded originally and depends upon many aspects – whether Fixed Assets Fund created or not? – whether depreciation provided or not? – whether assets are maintained as a Block or Individual items etc…

If your accountant is not capable of passing such entries, email your query at contact@kcjmngo.com or write it in the comment section.

Conclusion

At any point in time, the Balance Sheet should reflect the correct pictures of the economic position of your organization. And Fixed Assets are one of such crucial items in the Balance Sheet. Thus, utmost care should be taken to identify and removal of Fixed Assets.  Also, special attention should be given to such fixed assets purchased from FC funds and how journal entries passed in the book and reflected in the FCRA Returns.

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5 items which should not be there in Balance Sheet

Currently, NGOs are busy preparing their final account for the previous financial year. It is highly recommended that the NGO accountant and NGO Head should always go through the Financials (Income & Expenses) and Balance Sheet, instead of blindly relying on Auditor (Chartered Accountant) before its finalization. It is always desirable to clean up Financials before 31st March.

Following are some of 5 things which should not be part of your Balance Sheet.

1. Negative Cash Balance

Many times this happens when one project is short of funds and expenses are spent from another project. However, care must be taken that, cash is not falling negative. Whatever the reason may be cash should not go negative.

2. Negative Bank Balance

At the end of the financial year, in the pressure of completing projects or to spent funds, cheques for payment are issued but not cleared by 31 March and thus sometimes when the balance is low on the bank, it shows negative. Though from BRS, it is easy to understand such situations, on the face of the Balance Sheet, it doesn’t look good. Plan beforehand at the end of the financial year and avoid negative bank balance.

3. Fixed Assets

20 Computers funded by some funding agency 5 years back and still it is showing in your fixed assets at some value. Out of that, many are not in use, some are scrapped. Care must be taken that those assets are shown in the Balance Sheet which is in actual use and at the correct value. Remove ‘ghost assets’ on a regular basis.

4. Staff Advance

It is a good practice to see that all staff advances are settled before 31 March. This will help in a clean presentation of the Balance Sheet.

5. Suspense Account / Temp Account

These are accounting terms used to park figures for the time being. Once the query solved pr transaction is traced, it must be transferred to the appropriate account. Thus utmost care should be taken to see that these type of accounts do not come up in the Balance Sheet.

Conclusion

Basically, the Balance Sheet is the first document people will see when assessing your organisation’s financial strengths. Thus it is very important to present it in an accurate manner.

If you aware of any such other items which should not go in Balance Sheet, write in the comment box.

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FCRA Update – Change in Office bearers/Key Functionaries

Another update in FCRA. Department has issued notice to ensure compliance with the provisions of FCRA 2010 to update Chief Functionary / Signatory. It is mentioned in the notice that, department has observed that some of the organizations have changed their office bearers/ key functionaries without approval from the Ministry of Home Affairs and without updating the data on real time basis through the online application.

Download full notice here.

Which form to be filled?

Thus, notice instructed to all such organization to submit online Form FC-6 (Part E) about change in such office bearers / key functionaries. This form need to be filled on-line.

Link – https://fcraonline.nic.in/FC6.aspx?Resp_Id=3

When to submit?

The time period mentioned in the notice is within one month of date of the notice. Thus, last date for updation is 7th July 2019.

What documents to be attached?

Along with online form FC-6 (Part E), you need to upload documents in support of change in key functionaries.This may includes (i) Board Resolution for Addition / Retirement / Change in members (ii) Supporting document that such change has been notified to Registered Authority i.e. Trust Registrar, Society Registrar or Charity Commissioner as per your orgnisation’s registration.

Consequence of Non-submission of such forms within one month is not mentioned in this notice. However, it will definitely considered as violation of FCRA rules and regulations and accordingly steps can be taken against the organization.

Download Sample From FC-6 (Part E) – Here

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NGO Audit Report Revise Format in Form 10B

Every NGO, whether be it Trust, Society or Sec 8 Company, which is registered u/s 12AA, has to get their accounts audited with the Chartered Accountant. He has to give his Audit Report in Form 10B. (Checkout our video on how to file Audit Report of NGO). This report need to be filled online on Income Tax Website. This form is going to be changed with coming Financial Year. Earlier Form 10B Audit Report is just for 3 page which now change and become 8 pages. All the information from FCRA to 80G Donations to Expenses to Dis-allowances to TDS deductions – everything need to be certified by Auditor now.

Suggestions are welcome

Income Tax Department has issued a draft notification on May 21, 2019 (download it from here) for revising Form 10B. Also, department has asked suggestions from general public, NGOs and chartered accountants for such changes. Let us discussed such changes in Brief.

Donations

Till now, there was no mechanism in Income Tax to cross verify Donation receipts issued u/s. 80G by NGO and exemptions claimed by Individual Tax Payer for 80G. Here in this new form, Auditor has to certify total donation receipts issued by organization u/s 80G.  And it is mandatory now to take PAN of the donor.

The format is as under :-

Anonymous Donations

If PAN is not available from the donor, it will considered as Anonymous Donation. This also need to report and certify by Auditor in specific format. Thus to eliminate anonymous donation, even a small amount of donation mus be backed by PAN and donor details.

Donations in kind

Also, a separate information is to be provided for Donation in kind. However, in one of the point No I – 1, the form asked the detail whether this donation in kind is invested properly as per sec 11(5). There is some confusion here. Suppose you got a Car in Donation, how do you invest the same as sec 11(5)?

FCRA Details

Earlier only FC registration number was to mention. But in new form, auditor has to give all the details regarding FC Contribution received with Name, Address and Country Code of Foreign Donor.

Business Receipts

Even, auditor has to certify about the receipts from business or professional activities of NGOs. Thus all those income received by NGOs for providing goods or service need to be reported by Auditor.

Other Changes

There are many other notable changes where auditor has to certify about Loan taken or given by NGO, Non-Deduction of TDS, Late filling of TDS returns, other penalty paid, Depreciation detail, Investment made by NGO etc..

NOTE –  This is a draft report format. If you have any doubt, query or suggestions, income tax department has given email address – niraj.kumar82@nic.in

You can email your suggestions to above email address or write to us.

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Last and Final Warning from FCRA

Another notice has been issued by FCRA department on 06 th May 2019 for non-submission of mandatory Annual Returns from the year 2011-12 to 2016-17. Also mentioned in the letter that various notices has been issued to the organizations, who have not filled mandatory annual returns.

Check the notice here – Document

Further 15 days notice has been given to associations to file annual returns.

However, this notice has been issued to all the organizations with disclaimer that if organization has already filled the return, ignore this notice.

As an organization, you should login to FCRA website and check whether all your returns are properly filled ELECTRONICALLY. Make sure, online in your NGO login, it shows like below image :

 

Did I miss something?

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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Step to Step process to get 80G Certificate

What is Sec 80G ?

Under this section, donor gets benefit of Tax Exemptions from his income, if he has donated to Organisation, having 80G Certificate.

Benefit to Donor

1. Its a charity and satisfy donor with sense of “giving”.
2. For Tax Exemption, 50% of the amount of donation will be exempt from Income Tax limiting to 10 % of Gross Income.

Benefit to Organisation

1. 80G approved NGOs get more donations.
2. Though it is not mandatory to have 80G certificate, many Funding Agency prefers 80G approved Organisations for funding.

Procedure :-

Application need to be filled in Form No 10G by Online mode only. Follow below steps to apply for 80G with the following documents.

Keep below documents/information ready

1. Copy of Registration Certificate.
2. Copy of Trust Deed / Society Deed/MOA.
3. Copy of PAN.
4. Copy of 12A Certificate or Acknowledgement of application of 12A.
5. Copy of last 3 years Audit Reports, if any.
6. Note on Activities for last 3 years, if any.

Notes :-

1. All the above copies must be self-attested by authorized person.
2. If certificate is in vernacular language, then get it translated in English and notarised it.

13 Steps for 80G Application

Step 1. Go to this website

https://www.incometaxindiaefiling.gov.in/home
Click on “Login”.

Step 2. Fill Login Details

Enter UserID = Organisation PAN.
Enter Password.
Enter Captcha.
Click “Login” .

Step 3. Go to “e-File”

Click on “Income Tax Forms”.

Step 4. Select Form Name = “Form No 10G …”

Step 5. Select Submission Mode = “Prepare and                      Submit Online”

Step 6. Fill General Information of Form

Click on tab “Form 10A”
Fill General Information – Name, Address, Email, Mobile etc..

 Step 7. Fill Trustee/Board Members Details

Step 8. Fill Applicable Details

Fill these other details whichever is applicable to your Organisation.

Step 9. Fill Detail of Signing Authority

Name, Address, Phone, Email etc..

Step 10. Preview the Form

Download draft form in PDF and check correctness of details.

Step 11. Upload Documents

Upload scan copies of relevant documents.
Click on “Submit” button in the bottom.

Step 12. E-Verification of Form

There are three options to e-verify this form.
1. If you have already generated EVC (E-Verification Code).
2. If you do not have EVC, click this, it will email you OTPs.
3. If you select AADHAR Option, OTP will be sent to Auhtorized
person Mobile linked with AADHAR.

Step 13. Acknowledgement

After verification as above, a Transaction ID has been provided. Note down that.
Also acknowledgement has been sent to given email address.
Take a print of it and keep it in file for future reference.

Time

Generally, within 15-30 days, a query raised by Assessing Officer asking for more documents or explanation.
Sometime, even Assessing Officer asked for personal visit by trustee or authorized person for explanation, if reqired.
Mostly within 2 to 3 months, Certificate of 80G has been issued.

Consequences

If, NGO do not have 80G certificate, donor can not get exemption
from tax from their Income and thus fund raising activity
certainly affected without 80G certificate.
Points related

Points related to Donation Receipts

1. Donation Receipt must contain – Date, Pre-printed serial number, Name and address of NGO, Name of Donor, Amount in figure and word, Mode of payment, Purpose of Donation, 80G certificate number and sign and seal.

2. It is advisable to have hardbounded receipt book with preprinted
serial number for good internal control system.

3. Trust can have multiple receipt books. But need to justify, why
it is necessary to have multiple receipt books.

4. It is advisable to issue receipts for each and every donation.

5. Also, keep PAN of Donor as a proof that it is not anonymous donation if asked by Assessing Officer.

 

 

 

 

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How UDIN affects NGO Utilization Certificate?

UDIN is made compulsory from 01.02.2019 on all the Utilization Certificate of Grants.The first question comes in your mind what is this UDIN is all about? Oh God..another update or compliance? But, Do not worry. This is applicable to NGO Grant but not to be done by NGO itself. So, Let us discuss in detail what is UDIN and how its applicable to NGOs.

UDIN = Unique Document Identification Number

 

Back story of UDIN

Let us assume that, you have submitted an Audited Utilization Certificate to Funding Agency, which may be foreign funding or CSR or Government. How this Funding Agency verify the genuiness of this certificate?

So, there was no such way to verify the Certificate given by Chartered Accountant, that it is signed and certified by the Chartered Accountant or someone has faked his/her signature or whether the person is CA or not and so on. Institute of Chartered Accountants of India (ICAI), regulatory authority for CAs were getting such kind of complaints from agencies like Banks, Embassy, Income Tax, Funding Agency etc..

What is UDIN?

It is 12 digit unique identification number for every documents signed by Chartered Accountant as Certificate.

How UDIN Works?

ICAI has started a portal https://udin.icai.org . And make it mandatory for evry Chartered Accountant to get UDIN for each Certificate issued by them. ICAI has listed out 30 such kind of certificates for which UDIN is mandatory for now.

Under this list of 30, Point no 13,14,15 and 16 are specifically applicable to NGO grant. They are as under :-

  • Certificates for  funds/ Grants utilisation  for NGO’s
  • Certificates for  funds/ Grants utilisation  for Statutory Authority
  • Certificates for  funds/ Grants utilisation  Under FERA/FEMA/other Laws
  • Certificates for  funds/ Grants utilisation  Charitable trust/institution

Who is responsible?

Responsibility to generate and quote UDIN in each such certificate is with Chartered Accountant and not on NGO. However, it is advisable for NGOs to ask auditor to quote UDIN on each such utilization certificate. Also, after some times, once awareness created, funding agency will not accept UC without UDIN.

Check out this video

Any Query or Qustion? Contact us –

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Are you in the list of “Tax Exempted institutes”

As a good initiative of governance, Income Tax department has made the list public for all the institutes which are having tax exemption under various sections like 12A, 80G, 10(23c) etc..

You can search your organisation’s name in this list of exempted institutes by following method.

Step 1 : Go to this website –

https://www.incometaxindia.gov.in/Pages/utilities/exempted-institutions.aspx 

Step 2: Enter PAN number in Search Area

There are lots of fields are given for searching NGO in exemption lists, like Name, PAN, Sections, Text even as an advanced search like range, authority, dates etc.. But because the database is so huge, it is advisable to use your NGO’s PAN for searching purpose.

Step3 : Check the status

In case of any discripancies

You may get discrepancies related to your exemption status or not getting your name at all. Like I have experienced that, exemption for 12A is showing for particular organization but not for 80G.  Income Tax department has not put any button or email to contact regarding any query related to this utility or database. However, in “Contact us” page, toll free numbers are given where one can contact and raise their query.

Contact us if you have any further query.

 

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