INCOME
TAX
PRIVILEGES
TO THE DONORS U/S 35AC
INTRODUCTION
01
As we already know that an NGO can avail income tax exemption by getting itself
registered
and complying with certain other formalities, but such registration doesn't
provide
any benefit to the persons making donations. The Income Tax Act has certain
provisions
which offer tax benefits to the "donors". All NGOs should avail the advantage
of
these provisions to attract potential donors. Section 35AC is one of such sections.
REGISTRATION
UNDER SECTION 35AC
02
The Central Government approves certain NGOs and notifies them as eligible for
project
or schemes for the purposes of section 35AC. If an NGO succeeds in getting such
an
approval for its projects then it stands a very good chance of mobilising funds from the
corporate
and the business sector. Business houses making contribution to such approved
projects
are allowed the benefits of deducting such contribution as expenditure.
NATIONAL
COMMITTEE
03
The Central Government has constituted a National Committee to identify projects
and
schemes to be notified under section 35AC, such committee normally consists of
eminent
persons. All NGOs are entitled to apply to the National Committee to get its
projects
or schemes approved.
THE
APPLICATION AND ITS ENCLOSURE
i)
The application is to be made in 2 Sets, written either in Hindi or English.
ii)
Details such as name, address and status of applicant, the district/ ward circle where
assessed/PAN
number.
iii)
Audited Balance Sheet, Profit& Loss Account or Income& Expenditure Account for
the
latest year and two preceding years.
iv)
How is it constituted i.e. whether as a trust, society, etc supported by relevant
documents
like trust deed, rules & regulation, memorandum of association etc. and
registration
certificate, if any.
v)
Name & Addresses of the persons managing the affairs of the association or
institution,
including those who left the organisation but were managing the affairs of the
association
or institution during the 3 years preceding the date of application.
vi)
If the association or institution is notified under section 10(23)(C) or is approved for
the
purposes of section 80G, the particulars of such approval granted.
vii)
Brief particulars of the activities of the association or institution during 3 years
preceding
the date of application or since inception if the association or institution is less
than
3 years old.
viii)
Such other information as the association or institution may like to place before the
National
Committee.
ADDITIONAL
INFORMATION REGARDING THE PROJECT/SCHEME TO BE
SUBMITTED
(i)
Title of project or scheme;
(ii)
Date of commencement;
(iii)
Duration and the likely date of completion;
(iv)
Estimated cost of the project ;
(v)
Category or class of persons who are likely to be benefited from the project or
scheme;
(vi)
Affirmation that no benefit from the project or scheme other than remuneration or
honorarium,
will accrue to persons managing the affairs of the NGO ;
(viii)
Such other particulars as the applicant may place before the National Committee.
CERTIFICATE
TO BE ISSUED TO THE DONOR
05
All approved NGOs are required to issue a certificate to the donor for all contributions
&
receipts under section 35AC. The certificate is to be issued in Form 58A.
06
This certificate will enable the donor to claim exemption from its taxable income.
Further,
the NGOs should also send an Annual Report to the National Committee
indicating
the progress of the work relating to the project/scheme and the following
informations
in respect of each contributor :
i)
name of the contributors & their addresses.
ii)
PAN.
iii)
amount of contributions.
iv)
the project/scheme for which the contribution is made.
v)
total amount of contribution received during the year.
vi)
total cost of the project approved by the National Committee.
07
Such Annual Report should reach the National Committee by 30th June, following the
financial
year in which the amount is received.
DEDUCTION
OF CONTRIBUTION UNDER SECTION 80GGA
08
Section 35AC is available to assessees who have income from the head ‘business’ or
‘profession’.
Therefore, for the assessees who do do not have income from business or
profession,
section 80GGA provides for deduction on donations made to eligible projects
under
section 35AC. Section 80GGA, is a broader section and deductions are also
available
for contributions made for scientific research under section 35CCA & 35CCB,
which
have been withdrawn. 100 per cent deduction is available under section 80GGA,
subject
to the available gross total income under section 80A. Therefore, unlike section
35AC,
deduction under section 80GGA cannot be carried forward in the form of losses to
next
year .
OVERALL
SUMMARY
09
To sum up the discussions :
i)
Under section 35AC, organisations having income from business or profession can get
100
per cent deduction. Charitable Organisations can get registered themselves u/s. 5AC
by
applying to the National Committee under rule 11F to 11O,
if
they are carrying on
any
business.
ii)
The Central Goverment
has specified various types of projects of national needs for
which
Charitable Organisations can make donations.
iii)
Business houses making donations for the purpose of section 35AC, should be careful
that
the donee organisation continues to enjoy approval u/s. 35AC. As the approval under
section
35(AC) is not permanent in nature.
iv)
To get approval u/s. 35AC two sets of application have to be made alongwith
specified
enclosures to secretary of National Committee, New Delhi.
v)
The National Committee may recommend or reject the project but when the approval
is
recommended then it is for a period of maximum 3 years and it could be further
extended
if the National Committee is satisfied with the performance during the period.
vi)
A certificate has to be issued to the donor in Form 58A. This certificate will enable
the
donor to claim exemptions.
vii)
The National Committee may withdraw the approval if the project is not carried out
in
accordance with the approved conditions. To withdraw a project National Committee
should
provide an opportunity of being heard to the aggrieved organisation.
viii)
Section 35AC provides deduction from income from business and profession.
Similar
deduction is also available u/s. 80GGA, for assessees having income from other
heads.