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
Every NGO, whether registered as Trust or Society or Sec8 Company has very specific main objects. However, sometimes during the lifespan of trust, it need to change (add or modified) some of the objects already stated in the constitution of the NGO. The question is to whom NGO should intimate regarding the change.
Depending upon the entity, NGO should intimate to the authority under which it got registration originally. Suppose, NGO is registered as Trust under the Bombay Public Trust Act and Society Registration Act. Then, intimation should be sent to Charity Commissioner and Society Registrar. It is mandatory to intimate the authority.
If NGO has FCRA registration, at the time of registration, nature of association is to be mentioned. There are five types of nature of association specified in the Act. They are Religious, Cultural, Economic, Educational, Social. It is advisable to check the registration certificate of FCRA where it is clearly mentioned. If NGO has change its objects and which is not mentioned in the registration certificate, NGO has to file Form FC6 regarding change of objects of the trust.
After the amendments in Income Tax Rules 2018, Income tax department has notified on 19.02.2018 ,If you are a registered charitable trust, society or a company registered u/s 8 of the Indian Companies Act 2013 and if you have changed or amended the objects of your organization, the Income tax Act 1961 now requires your organization to apply afresh for registration u/s 12A in the new online Form 10A. This must be done within “thirty days from the date of such adoption or modifications of the objects”.
It is not mandatory, but advisable to even intimate about change in main objects of the trust to donors and Funding Agency. It is a good practice.
As all of you aware that now, every NGO having FCRA registration needs to either file quarterly return online at the FCRA website or upload it to their own website. Check out our blog on this.
FCRA department has just made it public the list of NGOs who have filled quarterly return for the period Oct-Dec and Jan-March for the year 2015-16.
Follow these steps to check whether your NGO has filled Quarterly Return or not.
Step 1 – visit https://fcraonline.nic.in
Step 2 – Click on “Information Bank” in the Menu
Step 3 – Click on last tab as mentioned below in screenshot
Step 4 – Select the year and Quarter and a list will be displayed as mentioned below.
So, on this list you can check which NGO has filled return. It is advisable use Find Button by pressing “Ctrl F”. Also search NGO by registration instead of name to get accurate result.
As you aware that as per new FCRA Act, all the organizations have to upload FCRA documents to the official website of the organization. Read this blog for more details.
If your organization do not have any website or do not afford to have one. you can create free website as illustrated in this video
Grading an NGO is not a new idea, since 2004 Credibility Alliance was rating NGOs and till now rated more than 200 NGOs in India. Globally, credit ratings of NGOs are done by third party since very long specifically in USA and UK. But now, when CRISIL has introduced credit rating of NGO in India, this will definitely change the scenario of existing fund raising and play very crucial part to attract large donations.
CRISIL is very known agency in India for Credit Ratings and Risk Analysis. CRISIL has recently graded two NGOs, HelpAge India was assigned a VO-1A grade and SOS Children’s Village (SOSCV) was given a ‘VO-2A grade.
CRISIL has come up with two sets of grades for NGO. One for Capacity Delivery and Second for Financial Proficiency. In case of Capacity Delivery ratings are from VO 1A (very strong) to VO 5A, And for Financial Proficiency grades are High, Moderate and Low.
As mentioned above CRISIL has come up with Capacity Delivery and Financial Proficiency.
In Capacity Delivery mainly three things are focused –
1) Profile – means people driving the NGO, Founders, Trustees and such other aspects
2) Process – means how sound an NGO is in Processes, training of Field Staff, project implementation process etc.
3) Program – Impact Analysis of Flagship program of NGO.
To Analyse Financial Proficiency, there has been rigorous procedure to check –
1) Ability of NGOs to raise funds.
2) How well funds are utilized.
CRISIL has not mentioned anything on its website regarding application for Credit Rating of NGOs. However I am in touch with their officials and try to get the information. If you wish to apply for CRISIL, put your request and email ID here. I will get back to you once I got all the information.
The new Financial Year is at the doorstep. There are some steps to be taken in the beginning of the year, so that the whole financial year will pass smoothly. One of such step is to prepare Standard Chart of Accounts in NGO.
In common terms, chart of accounts means, ledger accounts and group accounts shown in books of accounts. For different types of business activity and entity, chart of accounts is different. To maintain uniformity throughout the financial year, it is advisable to have standard chart of accounts. These charts will also help you to know how your seis tax relief investment scheme works.
Why Chart of Accounts require in NGO ? As we know, there is vast difference in ledger accounts of corporate world and ledger accounts of NGO, specifically ledger accounts of Income and Expenses Group. When it comes to leading a business, some of the most important decisions you will make are about how you organize this list of GL accounts so that you, as the CEO, can create reports. In Corporate World, common ledger accounts are Sales Account, Service Income Accounts, Purchases, Salary Account, Telephone Expenses, Office Expenses, Stationary Expenses etc… However in NGO, apart from above, we have to take care of Budget line items of particular funding agency, so mainly ledger accounts are equal to line item of budget. Here an NGO grouping is made according to projects. Thus it is one of important exercise accountant has to do is preparing Standard Chart of Account in NGO at the beginning of the year. For those of you who are new to this task, you can work alongside other future CEOs at Search Fund Accelerator while taking advantage of the firm’s best practices and technologies in this and any other field.
Al l the ledger accounts of the projects, which are continue as on 1st April, are to be identified and put on paper or prepare an excel sheet with grouping.
Apart from Projects, if NGO is doing other activities, like income generation, production, consultancy assignments etc… then, one hast to identify this type of common income and expenditure accounts and add in to that excel sheet.
Chart of Accounts also includes even balance sheet items. There are mainly two types of Balance Sheet items, some of which are same from year to year like Trust Fund Account or Corpus Fund Account or Building Reserve Fund Account, Name of Bank Accounts etc …. and others are changing in nature like Salary Payable Account, Audit Fees Payable Account etc.. One has to incorporate both these type of balance sheet items in the list.
After finalizing all ledger accounts, next step is to give group name to it. We can give grouping according to project name like Bal Vikas Shiksha Group Expenses or Mahila Suraksha Project Expenses. Also, for Balance Sheet items, group name is given like Grant Unutilized, Receivable Grant etc…
Once exhaustive list of accounts are prepared, it should enter into Accounting Software maintained by NGO. Either you have to enter chart of accounts manually in the software or you can import excel into accounting software if such facility is there. In Tally ERP9, you can easily import chart of account from excel sheet.
Please check out below an example of Chart of Accounts prepared by me. This is standard example, you have to prepare according to your NGO’s project and expenditures.
Chart of Accounts in NGO is to be prepared every year, because every year some projects are closed and some new projects are implemented by NGO. Looking to benefits of preparing chart of accounts, it is highly recommended that one has to spare some time right at the beginning of financial year to prepare chart of accounts in NGO.
BEFORE year ends on 31st March, NGO has to look out some points regarding its books of accounts. An NGO has to prepare an Income & Expenditure Account, Balance Sheet and Receipts and Payments Account. In case of Income Expenditure Account and Receipts Payments Account, only current year figures are taken and thus no cleaning process required for it.
However in case of NGO Balance Sheet, figures and items are carried forwarded from year to year. In many of the accounts, only opening balances are carried down from years without having any transactions, and thus every year it is the duty of NGO Accountant to look at the Balance Sheet before 31st March, list out such types of dormant accounts and pass necessary journal entries to remove it, only after taking approval from higher designated person of the NGO.
Mostly Fund Accounts with very nominal balance, mostly in Unutilized Grants or Grants Receivables may be consider as dormant. If project was completed before 2 to 3 years back and if there is nominal balance either positive or negative, should be transfer to General fund.
Because of emphasis of Government funded projects to open a Separate Bank Account for Project, it may be seen that in an NGO, more than 5 to 10 Bank Accounts are opened. As such, there is no limitation on Maximum number of Bank Accounts, it should be restricted for administrative smoothness. Secondly, some charges are debited every year even we do not use Bank Accounts. To avoid all such, it is lookout of accountant to identified such unused bank accounts and start procedure of closing it.
Some of the Fixed Assets in NGO are on paper but you could not find it physically. I say them “Ghost” Fixed Assets. All these type of “Ghost” Fixed Assets should be removed even from paper by passing resolution and journal entries.
TDS of NGO is deducted from consultancy, or on Interest on Fixed assets and such other types of Income. This TDS is claimed as refund in Income Tax Return of NGO. However due to slow process of Income Tax Department in issue of refund. These “TDS Receivable” Accounts are carried forwarded from years. Sometimes, refund is already deposited in bank account but not properly accounted for. Go to this link of Refund Status Website to check how much refund is pending and only those related refund accounts should reflect in the NGO Balance Sheet
NGO Balance Sheet is a financial mirror of any organization and thus it must be clean periodically, else the picture reflects, will not look transparent.
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.
Now a days, preparing NGO budget requires three dimension knowledge of Financial, Project and Activities and Presentation skills. NGO budget can not be prepared by each and every one. Today, Let us discuss some of the myths regarding NGO Budget.It becomes practice and tradition year after year. But facts are different than these myths.
Generally, we all believe that, once Budget is fixed an approved by donor, it can not be changed. But the fact is budgets can be modified to some extent. You can diversify your resources and cut your costs. Of course, take prior permission from your donor agency for this.
This is very common myth that budget can be prepared in couple of hours. Take the blank format of Excel Sheet, Put the figures and done. Often in our effort to meet deadlines, we develop budgets overnight. This ends up in poor planning and even rejection of proposals. Always take time to build your budget – your NGO should live with a budget always!
While preparing budget, we believes that figures contain in the Budget need not be exact. If it is nearby or approximate, than its OK. But the fact is Budget should be developed on a certain base. They cannot be developed without any basis. In most cases, the basis should be the previous year’s income and expenditure. If applying for a project, look out for the expenses of the project’s previous year. Donor funding limitation to be also considered.
Generally, Budget is prepared by either Project coordinator or Trustee – single person or may be two persons. However Budget work is a joint exercise. It is a team work. Involving the entire team including Administrative and Accounting Staff is important to produce an effective budget.
All budgets do not have same formats. Different budgets are developed for different purposes. If you are writing a proposal, it is a different budget format and if you managing an organization, you will have a different budget format. Similarly, different donor agencies have different budget formats.
source : fundsforngos
Can an NGO collect donation in cash? yes. NGO can collect donation in cash. However it is advisable to take donation by cheque and make the system transparent.
From 1/04/2013, the donor will not get any tax benefit for donation in excess of Rs. 10000 unless such sum is paid by any mode other than cash.
As per the new sub section 5(d) to section 80G of the Income Tax Act 1961, any payment exceeding a sum of ten thousand rupees shall only be allowed as a deduction if such sum is paid by any mode other than cash.
From the NGO point of view, NGO can accept donation in cash for more than Rs. 10000, but does not issue receipts claiming 80G exemption. From donor point of view, he can not get exemption under section 80G.
Also note that Rs. 10000 limit is per year per donor means a single donor cannot give more than Rs. 10000 in cash in entire year.
This amendment will take effect from 1/04/2013 in relation to A.Y. 2014-15 and subsequent Assessment years.
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.
