Applicability of TDS on NGOs’ Payment:
TDS is also applicable to the NGOs. There is no general exemption that Trust, Society or Non Profit Organizations are exempt from deducting and paying TDS. It depends on the Financial Transactions and limits of TDS specified every year in the Financial Act. Thus if NGOs makes payments to specific persons above specific limits, needs to deduct and pay TDS within time line specified.
Look into the example below regarding TDS:
NGO paid salaries = Tax would be applicable on the basis of slab rate.
NGO paid Professional Fees = TDS would be deducted @10% on the amount of above Rs. 30,000.
NGO paid Rents = TDS would be deducted @10% on the amount of above Rs. 2,40,000.
NGO paid to contractors = TDS would be deducted @2% and 1% on the amount paid to companies and others respectively. The Amount limit set for non-deduction of TDS under sec. 194C:
1. Amount of invoice which is to be paid or raised to contractor <= RS. 30,000.
2. Overall amount of invoices raised or payment made other than above(i) is <= Rs. 1,00,000.
Applicability of TDS on NGOs’ Receipts:
NGOs face, Tax Deduction at Source (TDS) on various income earned by them. For instance, Banks deduct TDS on the interest income of the NGOs. In case of large organisation, substantial amount of TDS could be deducted. In such circumstances the NGOs can avail the benefit of non-deduction of tax by the banker or the person responsible for remitting income, by following the specific provisions of the Income Tax Act which have been discussed U/s 197A.
Note: On the receipt of any grant by the trust is not subject to any tax at the time of receiving grant.
Declaration Under Section 197A:
1. Interest on securities
3.in respect of deposits under National Savings Scheme
4. Income in Interest other than interest on securities
5. Payments respect of units.
Rule 28AB of the Income Tax Act, 1961:
The persons mentioned above may make an application in Form No. 13 to the Assessing Officer for the grant of a certificate under section 197(1) authorising them to receive incomes of any type without deduction of tax at source, if the conditions mentioned below are satisfied.
1. The persons must have furnished the returns of income for all the assessment years for which such returns became due on or before the date on which the application in Form No. 13 is made;
2. the entity if for the time being approved for the purpose of exemption from income-tax;
The Assessing Officer may issue a certificate authorising payment of incomes without deduction of tax at source, the certificate shall be valid for the financial year specified therein.