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CBDT guidelines for NGOs seeking exemption U/s. 11 for providing relief to earthquake hit people in Nepal- Part I

Many NGOs and Charitable Organizations in India have expressed desire to support relief and rehabilitation work for the benefit of earthquake affected people in Nepal. While participation of such NGOs and Charitable Organizations in relief operations is encouraged, it is also necessary to ensure that the funds utilized for the purpose are not misused and are channelized in the desirable manner only. These NGOs are also seeking approval from Central Board of Direct Taxes (CBDT) to exempt from tax the funds applied by them outside India (i.e., Nepal) u/s 1 1(1)(c) of the Income tax Act, 1961(‘Act’).

Dated :- -08-07-2015

 Part I- Standard Operating Procedure (SOP) for making application for claim of tax exemption u/s 1 1(1)(c) of the Income-tax Act, in respect of remittance of money/relief articles by Indian NGOs/Charitable Organisations for earthquake hit people in Nepal.

Many NGOs and Charitable Organizations in India have expressed desire to support relief and rehabilitation work for the benefit of earthquake affected people in Nepal. While participation of such NGOs and Charitable Organizations in relief operations is encouraged, it is also necessary to ensure that the funds utilized for the purpose are not misused and are channelized in the desirable manner only. These NGOs are also seeking approval from Central Board of Direct Taxes (CBDT) to exempt from tax the funds applied by them outside India (i.e., Nepal) u/s 1 1(1)(c) of the Income tax Act, 1961(‘Act’).

In order to standardize the manner of seeking approval for tax exemption under the said section and to streamline the process of remittance of money or relief-articles to Nepal, following SOP has been outlined for the guidance of NGOs/Charitable Organisations. They are requested to adopt these procedures while participating in relief and rehabilitation operations at Nepal.

1. The applicant organization seeking income tax exemption u/s 11(1 )(c) should apply to Member(IT), CBDT, New Delhi. The application must contain the information as per ANNEXURE-I as well as other relevant information discussed at Paras5 to 9 below, as applicable. It must be ensured that complete information is provided and copies of required documents are enclosed.

2. Ministry of Finance, Government of Nepal has come out with “National and International Non-Government Aid Mobilization Directory 2015” (http://ndma.gov.in/images/pdf/criteria-for­donors-for-rehabilitation-and-reconsruction.pdf). Before making an application u/s 1 1(1)(c), the donor must be satisfied that carrying out any of the proposed relief activities would not violate the prescribed criteria and the procedure laid down therein would strictly be adhered to. For ready reference, a copy of the said Directory is enclosed as ANNEXURE – III. If it comes to the notice of any authority that the conditions prescribed in the said Directory have been violated at any point of time, the approval granted u/s 11 ( 1)(c) would be liable for withdrawal.

3. The applicant organizations must be registered u/s 12AA of the Income-tax Act.

4. However, before making an application to CBDT, it must be ensured that the Memorandum of Association/Trust Deed contains a specific clause as per which the activities of the nature of relief and rehabilitation of disaster-hit people is a duly mandated and permissible activity. If there is no such direct clause and the organization is still desirous of undertaking the same, it may, before making application to CBDT u/s 1 1(1)(c), consider amending/modifying the object clause of its MoA/Trust Deed suitably so as to include the same therein, following due procedure. Copiesof documents evidencing such changes must be enclosed alongwith the application u/s 1 1(1)(c ).

5. The NGOs/Charitable Organisations, who are eligible to apply u/s 1 1(1)(c ) in terms of conditions at Paras 2 & 3 above, shall be required to make compliances as prescribed in Paras 5 to 9 below.

6. (A) NGOs/Charitable Organisations which desire to providerelief assistance either to the Government of Nepal or to its agencies may furnish complete details in this regard.

(B) However, if such financial contributions are intended to be made to NGOs/Charitable Organisations of Nepal (which also includes sister organisations/units of Indian NGOs located and administered from Nepal), it shall be necessary to furnish self-attested copy of following documents-

(i) name and address of the remittee Nepalese NGO/Charitable Organisation;

(ii)      year in which the remittee organization was formed;

(iii)    name of bank, branch/address and account number in which remittance would be made;

(iv)      copy of PAN of the remittee as allotted by Internal Revenue Department of Government of Nepal;

(v)        evidence of registration of such organization with the authority concerned at Nepal;

7. (A) Several NGOs/Charitable Organizations have expressed the desire to send relief material of various kinds (e.g. food items, clothings, household goods, medicines etc.) to Nepal for distribution among earthquake hit people. The Government of Nepal has decided that relief materials in kind will be exempt from customs duty only if these are donated to the Government of Nepal for distribution as per the needs determined by the Government of Nepal. If an organization decides to undertake distribution by itself, the Government of Nepal would apply customs duty. Therefore, while applying, the organization concerned should specify its preferred mode of distribution.

It should also be ensured by the donors that the relief materials proposed to be sent/distributed should be part of the list of ‘needed items’ issued by the Government of Nepal. Such list is enclosed as ANNEXURE-II and is subject to updation by the Government of Nepal whenever desired.

(B) In the above background, the manner of distribution of relief materials can be categorized as under-

I. Donating items to Government of Nepal for distributing the same;

II. Handing over the material to NGOs/Charitable Organizations of Nepal for further distribution; and

III.      With the help of NGO’s volunteers from India to be deputed in Nepal for conducting/overseeing distribution work.

In each of the situation enumerated above, following documents/information would be required to be submitted-

Situation I: Item wise breakup of articles in following manner:-

Sl. No. Name of item Whether the materials is to be distributed through Government of Nepal or through NGOs/Charitable
Organisations/own resources
Whether                  appearing
in ‘needed items’ list (Annex-II).   If   yes, the corresponding Sr.   No.  of the   list dated………
Number of piece Cost per piece Total cost of item
Total cost =
Transport cost =
Other cost (specify) =
Total amount =

Situation II: In this situation, information/documents mentioned at (i) to (v) of Para 5(B)alongwith the item wise break-up of articles as per the Table prescribed for Situation I above would be required to be furnished.

Situation III: In this situation, in addition to information/documents required in Situation II above, an additional note on how and where arrangements for distribution of relief materials would be made and details of people/ volunteers deployed and their credentialsshould also be submitted.

8. In cases of NGOs/Voluntary Organisations, whichdesire to undertake construction activities (buildings, schools, hospitals etc.), counseling, vocational training, medical camps and to undertake such other long term work, would be required to furnish a complete note on activities to be undertaken alongwith manner in which the same would be conducted, authentic cost analysis (break-up), details of people/volunteers involved and their credentials. If such activity is to be carried out in association with some NGOs/Charitable Organisations of Nepal, PAN No and registration certificate of such organization issued by Nepal Government authorities concerned should be enclosed.

9. Consequent upon receipt of applications u/s 1 1(1)(c) seeking to provide financial assistance/relief materialin Nepal, the applications after initial scrutiny by CBDT, would be forwarded to the Embassy of India, Kathmandu, under intimation to the Ministry of External Affairs (MEA) and the National Disaster Management Authority (NDMA). Embassy of India, Kathmandu will confirm the registration details of the recipient and requirements of the relief material and distribution mechanism from the concerned authorities/entities in Nepal. Embassy of India, Kathmandu would thereafter convey its concurrence/views on each application to MEA for any further comments/vetting and onward transmission to CBDT, under intimation to NDMA.Based on these comments, final decision would be taken by CBDT on granting approval u/s 1 1(1)(c) of the Act.

10. CBDT would decide on a case to case basis further compliance requirement, if any.

11. The approval u/s 11(1 )(c) is given for each Assessment Year separately. Hence the application for the current financial year 2015-16 (i.e A.Y. 2016-17) should confine itself to the activities to be undertaken/funds to be utilized during the current year only. For further activities to be undertaken in subsequent years, applications should be made at a later date.

12. As the relief phase in Nepal is almost over and the rehabilitation phase has begun, the NGOs/Charitable Organisations may consider aligning their activities in such a manner so that the help offered by them is appropriately and meaningfully utilized.

13. The process of approval as discussed above shall remain in force till December 2015. The applications u/s 11(1 )(c) pertaining to F.Y 2015-16 should, therefore, be filed before that date.

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Read annexures forming part of the above guideline

Also Read –

Part II of the Standard Operating Procedure (SOP) (Part I – 08.07.2015) for making application for claim of tax exemption u/s 11(1)(c) of the Income-tax Act, in respect of remittance of money/relief articles by Indian NGOs/Charitable Organisations for earthquake hit people in Nepal.

Part III of the Standard Operating Procedure (SOP) (Part I – 08.07.2015) for making application for claim of tax exemption u/s 11(1)(c) of the Income-tax Act, in respect of remittance of money/relief articles by Indian NGOs/Charitable Organisations for earthquake hit people in Nepal

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