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A Non Government Organizations are established for the welfare of the society they need some financial assistant to run their welfare related works. These organizations arrange their funds through donations made to them by the governments or other individuals or corporate bodies. So to attract the finance for these welfare organizations the government has provided some tax reliefs and benefits to those making donations.
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. But this section provides benefit to only those assessees who have income from the head ‘business’ or ‘profession’ Under section 35AC, Organisations having income from business or profession can get 100 per cent deduction. Charitable Organisations can get registered themselves u/s. 35AC by applying to the National Committee under rule 11F to 11-O, if they are carrying on any business. The approval under section 35AC is for three years only and not permanent in nature
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.
Where the application is to be made
The application for approval by the National Committee should be made to the Secretary, National Committee for Promotion of Social & Economic Welfare, Dept. of Revenue, Govt. of India, North Block, New Delhi - 110001.
The application and its enclosure
Additional information regarding the project/scheme to be made
Certificate to be issued to the donor
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.
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 :
Such Annual Report should reach the National Committee by 30th June, following the financial year in which the amount is received.
Eligible project or scheme
An approved amount could be raised and utilised within a given period. In selective cases extension of period could be permitted for completion of the project. Generally, such notified ‘Eligible Project or Scheme get the node of the National Committee as mentioned below:
Committee may consider fit for support, in case:
Deduction of contribution under section 80GGA
Section 35AC is available to assessees who have income from the head ‘business' or ‘profession'. Therefore, for the assessees who 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.
Rajput Jain & Associates is pioneer management consultants rendering all together services to NGOs Civil Society Organisations and host of corporate and charitable institutions. It provides single window services for all registration under Trust, Society, 80-G, 12A, FCRA, 35AC, Section 35(1)(ii), Section 35(1)(iii) etc and NGOs, from conceptualization to fund-raising, project implementation to institution building, legal requirements to compliance services, etc
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