NGO and Budget 2014

Finance Minister has proposed many changes for NGOs and Trust in the Finance Act 2014. On one hand many relief are given and on the other hand adding more powers to CIT will cause hardship to NGOs. Let us take highlights of both :

Retrospective Tax Exemptions

It is proposed by Finance Minister that now a trust can claim exemption u/s 12 AA even for the period before applying registration of 12AA. Earlier trust can get tax exemptions only from the date of getting registration.

Exempt Past Assessment years

The Finance Bill, 2014 proposes to exempt Past Assessment Years where the assessment proceedings are pending before the AO on the date of registration.

Anonymous Donation

It is proposed that while calculating Tax Liability of Trust, instead of excluding entire amount of anonymous donation, only the amount in excess of 5% of total income or Rs. 1 Lac whichever are higher should be deducted.

Power of Cancellation

The amendment may create discomfort among NGOs is to increase powers of CIT to cancel Registration.  Earlier only in two cases CIT can cancel the registration 1) If he feels that activities of organization were not genuine and ii) activities were not being carried out in accordance with the object of the trust. In current Finance Act, another four such provisions added –

 if the institution’s activities are being carried out in such a manner that:

iii) its “income does not enure for the benefit of general public”

iv) “it is for benefit of any particular religious community or caste”

v) “any income or property of the trust is applied for benefit of specified persons like author of trust…”

vi)  its “funds are invested in prohibited modes”