A Non-governmental organization (NGO) refers to the organization which is established by a group of people to render their services not with the intentions of profit but with the sole purpose to help the society. The NGO is described as a non-profit making organization in which funds are raised from members, donors or contributors besides from receiving donations for their time or their energy and skills for accomplishing the social objectives such as imparting education, providing economic assistance to needy, providing medical facilities, managing disasters and other emergent situations.
NGOs are basically formed to serve the nation and its people. The main source of income or receipts of NGOs is donations or the subsidy, the grants from governments and the other donors who are willing to contribute to society.
Arpitha & Associates assist in the registration procedures of Societies, Trusts and Section 8 Companies and host of corporate and charitable institutions. It provides single window services for all registration under Trust, Society, Section 8 Companies, 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, Income Tax Services, Audit Services, FCRA compliance & FC3 returns, , Accounts Outsourcing Services, Trademark Registration, Copyright Registration and ISO Certification etc.
We guide our clients through the modes and methods, procedural formalities and the process of documentation. We also counsel them regarding the benchmark required for registration. Our panels of accountants with their sound professional information help organizations to meet the requisite criteria to obtain and avail tax exemptions for noble causes.
NGOs can choose any option to select the form of their constitution
Charitable Trust Registration
Charitable Trust is the simplest and less time-consuming method for registering a NGO which is organized for the purpose of philanthropic and religious purposes. Charitable trusts are those trusts whose object is to provide the services to all people in the society without discrimination of cast, creed and gender etc. However, these charitable trusts can be formed only for the benefit of Schedule Cast/Tribe or women. The Government of India has given various exemptions to charitable and religious trust keeping in view of the services they render to the nation.
A society is an association of several individuals combined using a mutual accord to deliberate, govern and act cooperatively for some communal purpose. Societies are usually registered for the advancement of charitable activities like sports, music, culture, religion, art, education, etc. Societies are usually managed by a governing council or a managing committee. Societies are governed by the Societies Registration Act 1860, which has been adapted by various states. Societies are similar in character to trusts, although there a few essential differences. While only two individuals are required to form a trust, a minimum of seven individuals are required to form a society. The applicants must register the society with the State Registrar of Societies having jurisdiction in order to be eligible to apply for tax-exempt status. Unlike trusts, societies may be dissolved.
Section-8 Non-Profit Company Registration
Section 8 is a company that is licensed under section 8 of Companies Act, 2013, formerly known as the section 25 company under Companies Act, 1956 with its main objectives to promote social welfare, religion, charity, protection of the environment, research, education, sports, commerce, art, science or any such other object; and intends to apply its profit, if any, or other income in promoting its object and intends to prohibit the payment of any dividend to its member.
Audit for NGO
There are four types of financial audit carried out for NGO to independently examine the activities of NGO and to verify that the NGO is working in adherence to law and order. The types of audits are as follows:
An external audit is executed by independent auditors to give a professional opinion on the credibility and fairness of the financial statements on the basis of careful examination of an array of samples of the records. The opinion of the auditor plays an important role as it provides a set of proofs that financial reports are true and can be trusted by stakeholders, trustees and donors.
An internal audit can be executed by the staff of the NGO or by competent professionals exclusively hired for audit. It includes verification of the NGO's policies and procedures and their consonance with law. This offers authenticated and updated information about the methods being followed to the trustees.
A donor audit can be performed by the NGO’s external auditors or by donors themselves. This entrusts confidence among the donors that their donations have been duly utilized under the legal conditions. A successful audit often bolsters additional funding’s.
An investigative audit can be performed when an NGO suspects a particular issue (which is usually related to fraud) and auditor needs to uncover all the primary as well as secondary facts. The auditors may put forth the proofs for the next steps that the NGO may opt to take.
INCOME TAX REGISTRATIONS & COMPLIANCES
12 AA Registration
35 AC Registration, 35(1)(ii) & 35(1)(iii)
80 G Registration
Annual Return Submission of Income Tax Returns
Audit Report of Income and Expenditure
Annual Report Submission to Registrar of Societies
FOREIGN CONTRIBUTION REGULATION ACT – FCRA
FCRA Registration Renewal
FCRA Reports and Returns
An NGO can avail income tax exemption by getting itself registered and fulfilling certain other formalities, but such registration does not provide any benefit to the person making donations.
To provide income Tax benefits to the “donors”, all NGO’s must apply for 80G & 12A certification. If an NGO gets itself registered under section 80G & 12A, then the person or the organization making a donation to the NGO will get a deduction of 50% of the donation amount of taxable income.
An NGO can apply for government funding if it is registered under 80G & 12A.
A newly registered NGO can also apply for 80G & 12AG registration.
If an NGO gets registered under section 80G & 12A, it is exempted from paying tax.
An NGO can apply for 12A certification and 80G certifications immediately after the registration of an NGO.
Government Funding: If an NGO gets registered under section 80G & 12A, it is exempted from paying tax
Tax Benefits: NGO can avail income tax exemption by getting an 80G certificate
Attract Donors: If an NGO gets itself registered under section 80G & 12A, then the person or the organization making a donation to the NGO will get a deduction of 50% of the donation amount of taxable income.
Lifetime Tax Exemption: - NGO does not have to pay tax for the entire lifetime if it gets registered under section 12A.
It’s easy for an NGO to get funding if registered under 80G and 12A registration.
If registration for 80G certification benefits & Liabilities satisfies your business requirement, then registration for 80G certification might best suit your NGO needs.
NGO income or assets should be exclusively for the purpose of charity.
Proper books of accounts of the NGO should be maintained, including all receipts and expenditures.
NGO should not be formed with the benefit of a particular religious, community, or caste.
NGO should have a core objective of charitable purposes, and whole income should be from donations. If in case, NGO has a business income, then the trustee of the NGO should maintain separate books of accounts to ensure that NGO should not divert donations received from donors.
80G certificate application will be submitted to the Commissioner of Income Tax.
Once the applicant submits the form and the required documents for 80G registration, the next step is on-the-premise inspection, which is to be completed by the Income Tax department. During the inspection process, income tax department officials might ask for additional documents and evidence if required.
On successful verification and scrutinizing of documents and evidence, the 80G certificate is awarded to the institution by the income tax Commissioner.
Approval u/s. 80G once granted shall continue to be valid in perpetuity unless and until a show-cause notice is issued by the concerned CIT
The applicant needs to file an application along with Form 10A, as per Rule 17A of the Income Tax Act, 1962, and submit it to the Commissioner of Income Tax.
Once the applicant submits the form 10 A along with the required documents for 12A registration, the next step is income tax officer inspection. During the inspection process, income tax department officials might ask for additional documents and evidence if required.
On successful verification and scrutinizing of documents and evidence, the 12A certificate is awarded to the institution by the income tax Commissioner.12A Registration is valid for a lifetime period unless NGO activities are against the law
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