Yes, TDS is applicable to the NGOs. There is no general exemption that Trust, Society or Non Profit Organizations are exempt from deducting and paying TDS. It depends on the Financial Transactions and limits of TDS specified every year in the Financial Act. Thus if NGOs makes payments to specific persons above specific limits, needs to deduct and pay TDS within time line specified.
Look the info-graphic below regarding TDS.
Note : Above rates and limits are for FY 2018-19
Do your organization have “Board Rotation Policy” ? Many funding agency and corporate asking this question before giving funds. It sounds irrelevant, but it is not. Every donor wants 100% utilization of single rupee, he donates to you. And every donor wants that an NGO should have highly effective governance. Today let us discuss this issue of rotation of board members or trustees in NGO from various view points, get your pregnancy pillow and get comfortable.
First and obvious question is about its legal implications. As, there are various acts in india under which an organization can be registered, there is no such specific rule regarding board member rotation and about timing. However, this issue is mostly addressed in the Trust Deed or Memorandum of NGO. If there is a clause in your Memorandum or Trust Deed regarding change or rotation of Board Members, you must follow it strictly.
It is not mandatory to rotate board members of NGO, but the benefits of such policy are very obvious that one should follow this practice. First and foremost, it shows good governance prevail in your NGOs, if you have rotation policy at regular interval. Second, it gives impression that, your NGO is having separate identity than only one or two individual founder members. It gives NGO more life span, when second generation leaders are trained this way.
Depends upon the scenario and what mentioned in Trust Deed. However, only changing designation of same persons over years will definitely gives sense to Donor about just implementing policy on paper and not in true senses. Thus, it is better to have a proper policy for mixture of both rotation and change.
The best policy is one which include robust period for the person to be in the board of the trust. Good boards should always have agreed terms of office so that there is a regular turnover of trustees and boards remain vibrant. Two terms of three years with a review at the end of the first term is fairly typical. NGOs should adopt this as best practice.
Once you have a policy for board rotation in your NGO, it is best practice to put the same in your Annual Return under some Compliance or Good Practice page.
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.
As per Income Tax Act, every Trust has to file Audit Report for the relevant Assessment Year in Form 10B.
This Audit Report of Trust has to be filled in Form 10B. It is mandatory to file this form online with Income Tax department website. This form is initiated by Chartered Accountant of Trust and later on approved by Authorized Representative (Trustee/secretary/chairman) of the Trust.
Last Date for filling Audit Report of Trust in Form 10B is 30th September. So For Financial year 2013-14 last date is 30th September 2014.
Just go through our video below showing tutorial on how to file Audit Report of Trust.
We have already discussed in this post about how to form NGO. After forming NGO in India, there are statutory compliance for NGO, which requires utmost care. Let us discuss all in detail, one by one.
After registration of NGO with State Charity Commissioner or Collector or Society Registrar, first thing is to apply for PAN of NGO. It is compulsory to apply for PAN after registration of NGO. You can apply PAN online through this website.
Commonly known as 12A certificate, this registration is NOT mandatory. Purpose of getting this registration u/s. 12A is to get exemption from Income Tax on the Income of the trust, if all the conditions laid down in this section are fulfilled. You can check detail procedure here how to apply for 12A certificate.
Again, this is NOT a mandatory one. However to give benefit of 50% or 100% exemption on donation to our donors, it is per-requisition to get the registration u/s. 80G of Income Tax Act. It is indirectly benefited to NGOs to raise funds. Go through this post for detail procedure to get 80G Certificate.
If there are possibilities to receive Foreign Funds for projects of NGO, a registration with FCRA department, Ministry of Home Affairs is compulsory. Without FCRA registration, NGO cannot receive any foreign donation or grants. Check more FAQs on FCRA here.
During the working of NGO at any point of time, if NGO become liable to deduct tax from source, it has to first apply for TAN. Like PAN , TAN application can be made online thought this website.
Only when NGO is providing services like consultancy work or research activity etc… and if gross revenue from such activity cross the basic exemption limit of service tax, then NGO has to first apply for Service Tax Registration number. Again it is an online procedure and you can apply for registration here.
Professional Tax is a liability of NGO to deduct from the salary of employee and deposited to Government. Professional Tax is State Government look out and thus different states of India having different rules for Professional Tax.
Retirement benefits like Provident Fund, Gratuity, ESIC etc.. is applicable to NGO when it grow up and having employees more than prescribed limit in this acts.
Depending upon the work and size of NGO, you can either apply for all the above statutory compliance immediately after registration of NGO or you can apply as and when requirement arises.
Yes 100% and why not? Every organization, irrespective of size and work pattern, has to prepare its Annual Budget, keeping main object in mind. An annual budget should be prepared, which is mainly activity wise. Have a look at below example.
Currently, most of the NGOs prepare Budget to give it to Funding Agencies and only restricted to activities in which funding agency is ready to fund. Instead NGO Annual Budget is given to funding agency and ask to fund accordingly to particular activities. I understand practically one has to adjust with funding agency requirements, however annual budget is to be prepared as part of disciplinary excercise and looking to its benefit given below.
First and foremost benefit is to give clear cut idea about which activity an NGO is going to undertake next year, how much funds already available and how much efforts require to raise remaining funds. It also helps in achieving Long Term Objectives. If NGO is having its 5 years plan or 10 years plan, NGO annual budget becomes an effective tool to convert plans into actions. Look at below chart, showing Funds already available and to be raised.
Next year NGO Annual Budget in Annual Report
Annual Report of NGO should always contain some of the points. Refer our this post. One of them is to put Next year activity planning along with Annual Budget of next year. This will give readers an opportunity to see organization’s future goals in quantification manner.
Fund raising activity is one of the tough task in any organization. To make that task easy, it is necessary to prepare 5 years activity plan and prepare Annual Budget etc..
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.
Advance Requisition Form is one of the important document which is very useful for Internal Control System. However there are many misunderstanding prevailing. Let us today, discuss five main myths regarding Advance Requisition Form in NGO.
Generally, Advance Requisition form is to prepared on monthly basis. However it is not standard rule. NGO having more turnover can prepare it on fortnightly basis. Sometime, amount involved in project expenditure are not higher or geographical location of Field office is far from head office, even quarterly Advance Requisition From can be prepared.
Anyone who is entitled to receive advance, has to prepare Advance Requisition Form in the NGO. Generally, in NGO, somehow, Management personnel receive advance money for project expenses or administrative expenses, are not preparing Advance Requisition Form. For Good Internal Control System, even trustee or management is require to ask for advance only through Advance Requisition Form
Advance Requisition Form is kind of estimation of expenditure for next month. It may not be accurate. However care should be taken that figures of expenditure are purely on the basis of approved budget of projects and near to accurate.
Not at all, it is very good document for internal control system, one can check the track records of expenditures. Even comparison can be easily done for what advances ask and how it is used. So that there are many importance of one document, if prepare and analyze properly.
Every NGO has to prepare format according to their requirements. Here you can find specimen copy of Advance Requisition Form. You can add or delete some of the information as per your requirements.
Once it is a part of the procedure of the NGO internal control system, it gives more transparency and efficiency in Financial and Management Control System
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.
CHANGE BOARD MEMBERS MORE THAN 50% UNDER FCRA
After taking FCRA registration, NGO has to take prior permission before making any change Board Members in excess of 50%. This condition is mentioned in the “Undertaking” given by the applicant at the time of making Application for Registration or for Prior Permission.
Details are provided below –
Where such provision mentioned?
it is not mentioned in the Act or the Rules, it becomes binding on all the organisations by virtue of the ‘undertaking’ . Look at the below specimen of ‘Undertaking’. It is a part of application form of FCRA registration or prior permission.
Why this kind of provision?
The primary purpose of this law is to prevent unscrupulous practices where the FC registered associations are taken over by changing the governance structure.
How to compute 50%?
Let us take one example. In an organization there were 7 Board Members at the time of Application made under FCRA. Later on one by one three Board Members were resign. Now fourth Board Member also wants to resign. So as per above undertaking, an organisation has to take prior approval from FCRA Department before change take place with fourth Board Member.
What if Change Board Members happen due to death?
There may be a change of more than 50% in the board as discussed above for reasons such as death or election by voting etc. which are not in the control of the organisations. In such cases, the organisation should inform the Central Government immediately after such change has occurred and get retrospective approval.
What is remedy If prior approval of such 50% not taken in ignorance of law.
In such cases the organisation should inform the Central Government immediately after becoming aware of such requirement and request for condonation of the lapse. The Central Government may consider the matter if the reasons are justified.
Is it serious offence ? what are consequences ?
The Supreme Court in CIT v. Nagpur Hotel Owners’ Association [2001] 247 ITR 201, held that the additional condition in a Form can be held to be mandatory only if the purpose and the scheme of the pertaining Act is threatened to be defeated. In this case, the Supreme Court held in favour of the Government, but made it very clear that any condition specified in a Form should be within the provisions of the Act and Rules. In our opinion, any change in the Board of Directors in the normal course of activity, does not seem to be a violation of FCR Act or the Rules
Recommendation
However, it is recommended that all organisation should inform the FCRA department and take prior approal wherever it is possible. Further, those organisations who have not taken permission, even after such change has occured, should apply for permission and condonation.
source – FMSF
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As per Accounting Standard 18, issued by Institute of Chartered Accountants of India, business entity has to show disclosure of Related Party Payments. This Accounting Standard is applicable from 1st April 2001. You can read full Text of AS 18 here.
AS 18 is also apply to NGOs in some cases. NGO has to show such disclosure when salary, remuneration or any other payments made to Chief Functionary, Trustees or Top management and associated with NGOs.This disclosure will form part of annual audited financial statements.
Remuneration paid to Trustee, Managing Trustee, Chief Functionary
Consultancy paid to Trustee etc…
Consultancy paid to Related NGOs where one of the Trustee
However Reimbursement of Traveling Expenses to attend meeting is not covered by this AS.Where to show such disclosure
Generally, this disclosure is to be made in financial statement of NGO. As per Income Tax Act, even Auditor of NGO has to disclose such kind of payments to his Audit Report under section 10B. In my opinion to reflect greater transparency, one has to show it in Financial Statements, Audit Report and even in Annual Report of organization.
As public money involved in NGO, it is accepted that each and every transaction must be very very transparent. Such kind of disclosure serve the above purpose and also it works as an internal check system in broader senses.
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.
