Tag Archive for: NGO and Budget

Amendments in Budget 2015 related to NGOs

Major Two changes are proposed to made in the definition of “Charitable Purpose”. One to include YOGA with other activities like Medical and Education and emphasis the benefits of a keto ultra diet in health activities. Another change is to aim at curbing irregularity of  filling of Income Tax Return of NGO by making it mandatory to accumulate part of the income. Let us discuss one by one in detail.

Yoga is now included in the definition of Charitable Activity

Honorable FM has proposed to include “YOGA” as sixth item in the definition of Charitable Activity after “Education” activity. Let us understand this provision, this means any organization having main object of “YOGA” can get full exemption of its income, even though income earned from Business Activity related or not with YOGA.

Several research studies in the last two decades unravel the benefits of yoga in terms of improved mood states, symptom reduction, stress reduction and improved quality of life apart from improving host factors that are known to affect survival in cancer patients such as for Ovarian Cancer Symptoms Inspire has reviewed. However, several metaanalysis and reviews show equivocal benefits for yoga. In this review, we will study the Yoga interventions in cancer patients with respect to expectations, benefits and risks and analyse the principles behind tailoring yoga interventions in cancer patients.

Example :- A Gym Trainer wants to start a Gym. If he, instead of registering as Firm or Company, registered a Trust and get certificate of exemption u/s. 12A, having main object of Teaching Yoga using equipment as yoga balls that are sold online, then  all the Income is exempted, weather it is from activity of Teaching yoga or normal exercise and gym activities including the best keto ultra diet plan.


Business Activity of Trust

It is proposed by Honorable FM that Charitable Organization engaged in Advancement of any other object of General Public Utility can have incidental business activity up to the limit of 20% of Gross Receipts of the Organization. Earlier it was Rs. 25 Lacs for all the organization. This is a good effort to make this provision rationalize.

Accumulation of Income

Under Section 11, Organization can accumulate their part of Income for utilization in future years. To exercise this option, Organization has to file Form 1o to Assessing Officer along with Income Tax Return with resolution stating such accumulation of income. However due to lack of clarification, Time limit was not fixed for filling such Form 10 and return. Now Honorable FM has proposed that this type of Accumulation of Income is permitted only if Income Tax Return of NGO is filled with in time limit i.e. 30 September.

Few Other Changes

Under Section 35, words “Principal Chief Commissioner or Commissioner” inserted to whom feasibility report is to be submitted. Under section 80G, donation to “Swachh Bharat Kosh” and “Clean Ganaga Fund” are added.


Inserting Yoga activities in the charitable definition may reduce unnecessary legal litigation regarding that but on the other had Government has to create such mechanism so that business activity behind the mask of Yoga can be traced and properly taxed.

Series – How to Configure Tally ERP9 for NGOs

Topic – Using Cost Category for Three Di-mention Reports

Do you need to provide different reports to different funding agencies in different format ? Are you using EXCEL as main tool to get report ? Do you need to take figures from Tally and present it in different formats ??? If, so than read this blog to configure Tally ERP9 in such a way to get almost all the reports from it.

What is the Problem ?

NGO need to report to different agencies / people in different formats. Like funding agencies wants  to know “Expenditure as per budget Head”, Trustees or Program Head wants to know about Project wise / Area wise / Activity wise expenditures and Auditor wants to know expenditure in standard format like nature wise expenses and so on…

What is the solution ?

To Create such an accounting system so that expenditures are entered once but get the reports from different Di-mentions. Tally ERP9 is capable of doing this by using Cost Category features. Lets take a look how we do it.

Step 1 – Configure General Settings

Gateway → F11 Features → Accounting Features → Cost/Profit Centers Management → Maintain Cost Center → Yes → More than once Cost Category → Yes


Step 2 – Create Cost Category

Gateway → Account Info → Cost Categories → Create

I have Created two categories

1) Project wise Expenses – For entering expenses as per Budget Head of the Project

2) Nature wise Expenses – For entering expenses as per Nature like standard expenses i.e Telephone Exp etc..


Step 3 – Create Cost Centers (Project Name)

Gateway → Account Info → Cost Centers → Create

I have Created three Projects – Project A, Project B and Project C expenses under Cost Category “Project wise expenditure”


Step 4 – Create Ledger Account  (Budget Head)

Gateway → Account Info → Ledgers → Create

Create Ledger Account same as per Budget Head of the Funding Agencies under Project Name as group (Indirect Expenses) .  See below image – I have created Ledger “Communication – Field (PA) under “Project A Expenses” under “Indirect Expenses”


Step 5 – Cost Center (Standard Expenses)

Gateway → Account Info → Cost Centers → Create

Now create Standard Expenditures under theses second type of Cost Category “Nature wise Expenditures”. I have Created Telephone Expenses and such other Standard expenses – see below image.


Step 6 – Voucher Entry

Now whenever voucher entry is made you have to select two components i) Project wise and ii) Nature wise.- see below image.


Step 7 – Reports

Gateway → Display → Statement of Accounts → Cost Centers → Category Summary

From this Report, you can get total expenses bifurcated in both way Nature wise Expenses and Project wise Expenses. Have a look.


Step 7 – Reports (Continue…)

Gateway → Display → Statement of Accounts → Cost Centers → Cost Center Breakup

From this Report, you can get total expenses Project wise. Have a look.


Conclusion – Use your creativity

By using cost category and your creativity, you can fulfill any requirements and have wonderful reports.

I have created Area wise expenditure to know exactly how much expenses in Rural Area and Urban Area or Filed office Expenses and Head office Expenses. Have a look….


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”