Short guide on Legal issues involved with NGOs in India

NGO’s or charity work in India can be carried out by various methods/forms of business, such as a Trust/ A society or by a Non-Profit Company.

Coming to the point of why the Government cancelled these licenses. What I have gathered is because:

• They violated the provisions of FCRA (Foreign Contribution Regulation Act)
• Annual Returns were not filed for three consecutive years
• Inadequate reporting of the receipt and utilization of all the foreign funds inflows

Other drastic steps taken by our dear government include:

• Government earlier had suspended the FCRA licence issued to Greenpeace India and frozen their seven bank accounts for various alleged violation of laws.
• The government last week ordered that funds coming from the US-based Ford Foundation should not be released by any bank to any Indian NGOs without mandatory permission from the Home Ministry.

So, from the above it is evident that we in the charity sector need to pull up our socks and start complying with the letter and spirit of law.

Okay then, how do you go about it?

Here’s exactly how, taking you right from its basic documents post formation:

1. First get a PAN.

After registration of NGO with State Charity Commissioner or Collector or Society Registrar, first thing is to apply for PAN of NGO.

Yes, it is mandatory.

2. Registration under section 12A of the Income Tax Act

Commonly known as 12A certificate, this registration is NOT mandatory. Purpose of getting this registration u/s. 12A is to get exemption from Income Tax on the Income of the trust, if all the conditions laid down in this section are fulfilled.

3. Registration under section 80G of the Income Tax Act

Again, this is NOT a mandatory one. However to give benefit of 50% or 100% exemption on donation to our donors, it is per-requisition to get the registration u/s. 80G of Income Tax Act. It is indirectly benefited to NGOs to raise funds.

4.  Registration under FCRA Act (Foreign Contribution Registration Act)

If there are possibilities to receive Foreign Funds for projects of NGO, a registration with FCRA department, Ministry of Home Affairs is compulsory. Without FCRA registration, NGO cannot receive any foreign donation or grants.

5. Getting a TAN

During the working of NGO at any point of time, if NGO become liable to deduct tax from source, it has to first apply for TAN. Like PAN, TAN application can be made online thought

6. Getting a Service Tax Registration

Only when NGO is providing services like consultancy work or research activity etc… and if gross revenue from such activity cross the basic exemption limit of service tax, then NGO has to first apply for Service Tax Registration number. You can apply for it online.

7. Yes, a Professional Tax Number is required

Professional Tax is a liability of NGO to deduct from the salary of employee and deposited to Government. Professional Tax is State Government look out and thus different states of India having different rules for Professional Tax.

8. Retirement Benefit if applicable (necessary registrations)

Retirement benefits like Provident Fund, Gratuity, and ESIC etc… Is applicable to NGO when it grows up and having employees more than prescribed limit in these acts.

Summary

Many of the registrations mentioned supra are need-based and should be done as and when they become applicable to your organisation.

Do write to us for further details required as to the procedure of getting these done.

(Author can be reached at [email protected])