01 As we already know that an NGO can
avail income tax exemption by getting itself registered and
complying with certain other formalities, but such registration
doesn't provide any benefit to the persons making donations.
The Income Tax Act has certain provisions which offer tax
benefits to the "donors". All NGOs should avail
the advantage of these provisions to attract potential donors.
Section 35AC is one of such sections.
REGISTRATION UNDER SECTION 35Ac
02 The Central Government approves certain
NGOs and notifies them as eligible for project or schemes
for the purposes of section 35AC. If an NGO succeeds in getting
such an approval for its projects then it stands a very good
chance of mobilising funds from the corporate and the business
sector. Business houses making contribution to such approved
projects are allowed the benefits of deducting such contribution
03 The Central Government has constituted
a National Committee to identify projects and schemes to
be notified under section 35AC, such committee normally consists
of eminent persons. All NGOs are entitled to apply to the
National Committee to get its projects or schemes approved.
WHERE THE APPLICATION IS TO BE MADE
04 The application for approval by the
National Committee should be made to the Secretary, National
Committee for Promotion of Social & Economic Welfare,
Dept. of Revenue, Govt. of India, North Block, New Delhi
THE APPLICATION AND ITS ENCLOSURE
i) The application is to be made in 2 Sets, written either
in Hindi or English.
ii) Details such as name, address and status of applicant,
the district/ ward circle where assessed/PAN number.
iii) Audited Balance Sheet, Profit& Loss Account or
Income& Expenditure Account for the latest year and two
iv) How is it constituted i.e. whether as a trust, society,
etc supported by relevant documents like trust deed, rules & regulation,
memorandum of association etc. and registration certificate,
v) Name & Addresses of the persons managing the affairs
of the association or institution, including those who left
the organisation but were managing the affairs of the association
or institution during the 3 years preceding the date of application.
vi) If the association or institution is notified under
section 10(23)(C) or is approved for the purposes of section
80G, the particulars of such approval granted.
vii) Brief particulars of the activities of the association
or institution during 3 years preceding the date of application
or since inception if the association or institution is less
than 3 years old.
viii) Such other information as the association or institution
may like to place before the National Committee.
ADDITIONAL INFORMATION REGARDING THE PROJECT/SCHEME TO BE
(i) Title of project or scheme;
(ii) Date of commencement;
(iii) Duration and the likely date of completion;
(iv) Estimated cost of the project ;
(v) Category or class of persons who are likely to be benefited
from the project or scheme;
(vi) Affirmation that no benefit from the project or scheme
other than remuneration or honorarium, will accrue to persons
managing the affairs of the NGO ;
(viii) Such other particulars as the applicant may place
before the National Committee.
CERTIFICATE TO BE ISSUED TO THE DONOR
05 All approved NGOs are required to issue
a certificate to the donor for all contributions & receipts
under section 35AC. The certificate is to be issued in Form
06 This certificate will enable the donor
to claim exemption from its taxable income. Further, the
NGOs should also send an Annual Report to the National Committee
indicating the progress of the work relating to the project/scheme
and the following informations in respect of each contributor
i) name of the contributors & their addresses.
iii) amount of contributions.
iv) the project/scheme for which the contribution is made.
v) total amount of contribution received during the year.
vi) total cost of the project approved by the National
07 Such Annual Report should reach the
National Committee by 30th June, following the financial
year in which the amount is received.
DEDUCTION OF CONTRIBUTION UNDER SECTION 80GGA
08 Section 35AC is available to assessees
who have income from the head ‘business’ or ‘profession’.
Therefore, for the assessees who do do not have income from
business or profession, section 80GGA provides for deduction
on donations made to eligible projects under section 35AC.
Section 80GGA, is a broader section and deductions are also
available for contributions made for scientific research
under section 35CCA & 35CCB, which have been withdrawn.
100 per cent deduction is available under section 80GGA,
subject to the available gross total income under section
80A. Therefore, unlike section 35AC, deduction under section
80GGA cannot be carried forward in the form of losses to
next year .
09 To sum up the discussions :
i) Under section 35AC, organisations having income from
business or profession can get 100 per cent deduction. Charitable
Organisations can get registered themselves u/s. 5AC by applying
to the National Committee under rule 11F to 11-O, if they
are carrying on any business.
ii) The Central Goverment has specified various types of
projects of national needs for which Charitable Organisations
can make donations.
iii) Business houses making donations for the purpose of
section 35AC, should be careful that the donee organisation
continues to enjoy approval u/s. 35AC. As the approval under
section 35(AC) is not permanent in nature.
iv) To get approval u/s. 35AC two sets of application have
to be made alongwith specified enclosures to secretary of
National Committee, New Delhi.
v) The National Committee may recommend or reject the project
but when the approval is recommended then it is for a period
of maximum 3 years and it could be further extended if the
National Committee is satisfied with the performance during
vi) A certificate has to be issued to the donor in Form
58A. This certificate will enable the donor to claim exemptions.
vii) The National Committee may withdraw the approval if
the project is not carried out in accordance with the approved
conditions. To withdraw a project National Committee should
provide an opportunity of being heard to the aggrieved organisation.
viii) Section 35AC provides deduction from income from
business and profession. Similar deduction is also available
u/s. 80GGA, for assessees having income from other heads.