NGO COMPLIANCE
COMPLIANCE OF AN NGO
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NGO
COMPLIANCE OF AN NGO
Soon after the Registration of an NGO, a lot of things need to be done, which would make the process of running a successful NGO much more efficient and, in fact, easy to manage.
Some of the processes after the formation of the NGO are mandatory procedures or compliances listed, monitored and regulated by the Constitution of India. At the same time, others are optional but will be extremely useful for the organization’s smooth-running process.
As soon as you set up and form your NGO, Taxkey advises you to follow the processes mentioned below. As discussed earlier, some procedures are mandatory, while others are subject to the directors’ interest or the organization’s nature.
- Applying for Permanent Account Number (PAN) for the organisation.
- Applying for Tax Deduction/Collection Account Number (TAN) for the organisation.
- Opening a Bank Account (Current Account) for your NGO.
- Applying for 12AB and 80G Certifications.
- Darpan Registration
- Corporate Social Responsibility (CSR) Registration
PAN & TAN
PAN & TAN REGISTRATION
The Government has made it mandatory for any organization (including Charitable NGOs) to apply for PAN as it will help them monitor and regulate all the organization's transactions. This protocol has been followed strictly in recent years to avoid organizations misusing the benefits offered to NGOs that work towards the welfare of society. It will also fortify the fact that the registered NGO is a legal entity that can perform several operations independently.
Note: It is also mandatory to have a Permanent Account Number for opening a Bank Account in the name of the NGO.
An NGO, like any other organization, may employ people to manage its assets. For instance, a Charitable NGO may employ an Event Manager to organize all the special events for downtrodden children. This employee needs to be paid, and his salary is taxable by law. Similarly, the NGO may employ any number of employees to take care of its operations. In this case, an NGO has the ability to deduct Tax at source and is liable to annual TDS filing, for which TAN Registration is mandatory. Hence, Taxkey advises every Founder of the NGO to register their TAN application soon after receiving your Registration Certificate. Click here to know more about the TAN Registration process.
Opening a Bank Account:
As mentioned earlier, after registration, your NGO is a separate legal entity. In order to perform financial transactions (i.e., sending and receiving of funds), a Bank Account is mandatory. An NGO can choose and associate with any bank based on its preference to open a bank account and perform transactions.
12AB AND 80G CERTIFICATES
APPLYING FOR 12AB AND 80G CERTIFICATES
Since an NGO is a Non-Profit organization and works towards a cause that benefits society, it is eligible for Tax Exemption both to the NGO as well as its Donators. But, to enjoy these benefits, an NGO should acquire 12A and 80G Certifications.
A 12A Certification is required for an NGO to enjoy Tax exemptions on any revenue-generating operations and on the donations received.
An 80G Certification is mandatory for an NGO to transfer Tax Benefits to its donors.
REGISTRATION
DARPAN REGISTRATION.
A Darpan ID is one of the most valuable assets of an NGO specializing in Social Welfare Activities. The Darpan Registration is an initiative of NITI Aayog (National Institution for Transforming India) to bring Government and Voluntary Organizations together and build an ecosystem of people who intend to work toward the welfare of the country. NGOs registered under the Darpan initiative of NITI Aayog are recognized by the Indian Government and are given first preference to receive funds from the Indian Government.
Since an NGO works towards the welfare and development of Fine Arts, Science, education, knowledge sharing etc., a Darpan Registration makes it much easier for the NGO to further its cause.
CSR REGISTRATION
CORPORATE SOCIAL RESPONSIBILITY (CSR) REGISTRATION
Any NGO which performs charity work, which has both 12A and 80G Certifications and has a proven track record of undertaking charity activities for a minimum of three years, is eligible for CSR funding. The respective NGO should mandatorily register with the Central Government of India by filing the CSR-1 e-Form.
Apart from these aforesaid processes, an NGO is also expected to adhere to some mandatory timely compliances put forth by the Indian Constitution.
Note: Recently, several amendments have been made by the Central and the State Governments to the NGO Regulation and Compliance policies in order to improve the reliability of the NGOs in India.
Some of the time-on-time Compliances that need to be maintained by an NGO are,
- Maintenance of Book of Accounts
- Filing of Income Tax Returns
- Submission of Annual Audit Report in form 10B through a practising Chartered Accountant.
NGO
RECENT ADDITIONS
- Renewal of 12A and 80G Certifications every 5 years after the formation of the NGO. (Earlier, these Certifications were issued to NGO Organizations with a lifetime validity)
- Any Donation received in any form by the NGO should be accounted for and has to be classified as a Specified Financial Transaction (SFT) (Implemented since the beginning of the Financial Year 2021 -2022)
- The Income Tax Department has implemented strict reform policies which were earlier taken for granted like
- Prohibition of Donations in Cash exceeding Rs.2000/-
- Strictly no Tax Exemptions for Anonymous donations to any charitable institution.
- Mandatory Filing of Returns, Tax Audit Reports and strict adherence to TDS (‘Tax Deducted at Source’) Rules.
- All the donations should be compiled and have to be furnished annually on or before 31st May of the subsequent Financial Year without fail.
- The details of the Donations should include the following,
- Name of the Donor
- Amount of Donation made
- Mode of Payment
- Date of Donation
- PAN/Aadhar Card details of the Donor (Not mandatory for small donations)
Note: No Tax Benefits can be passed on to the Donor in the absence of PAN card details.
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