Atma Webinar Oct 2016

New Delhi | Mumbai | Noida | Gurgaon

WEBINAR - NOT FOR PROFIT ORGANIZATIONS 20TH OCTOBER 2016

New Delhi | Mumbai | Noida | Gurgaon

Presented By : Suhel Goel FCA, CPA, B.Com (Hons.), D.I.S.A

[email protected] | +91 98100 09646

mailto:[email protected]

PREFACE

A Portal setup by the NITI Aayog in association with National Informatics Centre to bring about greater partnership between government & voluntary sector (http://ngo.india.gov.in/)• What is NGO Darpan? How does an NGO apply for Government grants?

Anna Hazare started an indefinite hunger strike on 5 April 2011 to pressurize the government to create an ombudsman with the power to deal with corruption in public places as envisaged under the Jan Lokpal Bill. • What is Lokpal and Lokayuktas Act? What are the reporting requirements of

an NGO?

In 2013-14, Delhi had received the highest amount of funding from the foreign donors, but in 2014-15, it registered a dramatic decline by almost 50 per cent in 2014-15. The Indian Government is becoming more vigilant for foreign funding.• What is FCRA? How do you ensure a regular and compliant flow of foreign

funds into your NGO?

3

AGENDA

Pathways to Establish an NGO

Compliances and Reporting Timelines under -

Foreign Contribution (Regulation) Act, 2010

Maharashtra Public Trusts Act, 1950

Lokpal and Lokayuktas Act, 2013

Income Tax Act , 1961

Government’s Partnership with NGOs

Developments in the NGO Domain

Q & A Session

4

Disclaimer: Information presented in this document is considered private & proprietary information (unless otherwise noted) and may not be distributed or copied. We strongly recommend that you seek professional guidance and opinion before acting in any way on the proposals. While SGA makes every effort to provide accurate and complete information, various proposals may change subsequently. SGA welcomes suggestions on how to improve our services and correct errors if any. SGA provides no warranty, expressed or implied, as to the accuracy, reliability or completeness of furnished information.

PATHWAYS TO ESTABLISH AN NGO

FORMATION OF NGO’s

SOCIETY

TRUSTSECTION 8 COMPANY

5


PARTICULARS TRUST SOCIETY SECTION 8 COMPANY

Governing Statute Relevant State Trust Act or Indian Trust Act, 1882

Societies Registration Act, 1860. Many states,

however, have variants on the Act.

Companies Act, 2013

Registration Document Trust deed. Memorandum of Association and/or Rules

& regulations

Memorandum and Articles of Association

Control Low Low High

Foreign Investment Tough Easy Easy

Members Required At least two trustees are required to register a

public charitable trust.*

Minimum – Seven Minimum - Two

Cost factor Low Medium High

FCRA Less preferred Less preferred Most preferred

6

*The limits may vary in certain states in India.


PARTICULARS TRUST SOCIETY SECTION 8 PRIVATE COMPANY

Change in Board of Directors/ Trustees/

Members

Easy Easy Easy

Change of Registered office

Easy Easy Easy

Transparency in working

Low Low High - as everything is available online.

Registration with Income Tax u/s. 12A &

80G

At par with Society & Section 8 Company.

At par with Trust & Section 8 Company.

At par with Trust & Society.

7

LAWS APPLICABLE TO NGOs- COMPLIANCE CHECKLIST

S. NO. GOVERNING LAW TASK

1 The Societies Registration Act, 1860Filing of Annual Report

Filing of Details of Managing Body

2 Maharashtra Public Trust Act, 1950

Filing of Annual ReportFiling of Audited Accounts

Filing of Income & Expenditure StatementFiling of Annual Budget

4 The Foreign Contribution (Regulation) Act, 2010

Prior PermissionRegistration in Form FC-3

Annual Return in Form FC-6Renewal of Registration

5Labour Laws

(PF, ESIC, Shops & Establishment Act to the extent applicable)

Payment

Return

6 Profession TaxPaymentReturn

7 Income Tax Act, 1961

Registration u/s 12AA & Approval u/s 80GTDS - PaymentTDS - Return

Filing of Income tax returnFiling of Form 10B, 10, 9A* (as applicable)

8

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010

Introduction

Applicability

Prior Permission

Registration

Renewal

Amendments as per FCRR, 2015 and Finance Act 2016

Other Compliances and their Deadlines

F

C

R

A

9

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010- INTRODUCTION

1969

• Home Minister raised the issue of regulation of foreign funding into India.• The intention was to prevent the onslaught that would follow due to foreign funding, which

would have had an influence on the functioning of the Government, Political Parties and Other Institutions in India.

1976-2009

• Foreign Contribution (Regulation) Act, 1976 was enacted and continued to function for several years until shortcomings were noticed.

• Certain Amendments were carried out in the aforesaid Act from time to time.• However, a complete overhaul of the provisions was recommended towards the mid 2000s

and accordingly a Bill was proposed in the parliament for this purpose in the year 2006.

2010-2016

• FCRA, 2010 was enacted with an aim to -• Regulate the acceptance and utilization of Foreign contribution or Foreign hospitality• Prohibit any activities detrimental to the national interest and for matters connected

therewith• With a view to streamline the functioning and digitise the filing various amendments were

proposed vide the Foreign Contribution (Regulation) Amendment Rules, 2015.

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Definition: Foreign Contribution


Incl

uded • Donation

• Delivery or transfer of any

article

• Currency

• Foreign Security

• Income generated from Foreign

Contribution. Eg - InterestEx

clud

ed • Fee

• Towards cost in lieu of goods or

services

A person may receive any foreign source, either directly or through one or more persons.

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Definition: Foreign Source


Incl

uded • Government of any foreign

country or its Agency

• Foreign company or corporation

• Foreign Trust /Foundation

/Trade

Union/Society/Club/Other AOI

• Citizen of a Foreign Country*Ex

clud

ed • United Nations or any of its

specialised agencies, the World

Bank, International Monetary

Fund

• Indian Company with more than

50% foreign shareholding

• Non Resident Indian*

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FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 - WAY FORWARD

13

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 - PRIOR PERMISSION

Any person may make independent and separate applications for prior permission for different projects simultaneously. However, re-application for the same project can

not be made before the expiry of six months from the date of submission.

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• be registered under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or Section 8 of the Companies Act, 2013 etc;

Registered

• submit a specific commitment letter from the donor indicating the amount of foreign contribution and the purpose for which it is proposed to be given; and

Commitment Letter

• submit copy of a reasonable project plan for the benefit of the public for which the foreign contribution is proposed to be utilised.

Project Plan

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 - REGISTRATION

A person should • Be registered under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or Section 8 of the

Companies Act, 2013 etc.; • Normally be in existence for at least three years; and• Should normally have spent at least Rs 10,00,000/- over the last three years on its activities• Submit copy of a details of Activities carried on during the last three years.

Caution Points

• Should not transfer fund to other organisations who are not registered under FCRA without permission• Should not intermingle domestic funds with foreign contribution

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Any person may transfer foreign contribution to any other person, ONLY if the latter party is registered under FCRA.

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 - RENEWAL

Rene

wal • Registration Certificate renewal due

after every five years.• Organizations which were

registered under Foreign Contribution (Regulation) Act, 1976 should have applied for Renewal by now

Docu

men

ts • The registration certificate under the statute of incorporation.

• Charter Documents• Copy of FCRA Registration

Certificate which is being sought to be renewed.

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• A person should normally apply for renewal of Registration Certificate alteast six - nine months before its expiry.

• Before filing such application, you should verify that particulars submitted at the time of inception match with those being submitted for renewal.

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 - AMENDMENTS

S No.

Old Provisions New Provisions

1 Applications of Registration (FC-3) and Prior Permission (FC-4) filled online with subsequent hard copy submission.

Form FC-3 for Registration & Prior Permission – To be submitted online only.

2 Renewal of Registration Certificate through Offline Form FC-5

Renewal through Online Form FC-3.

3 Hard copy of the applications - signed and submitted with the Ministry.

Applications are now digitally signed - uploading image of sign & stamp.

4 Hard copies of the attachments filed with applications - to be submitted within 30 days of the online submission.

The self-certified copies of required attachments are now scanned and attached online.

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Amendments were recently introduced through Foreign Contribution (Regulation) Amendment Rules, 2015 and Finance Act, 2016.

FOREIGN CONTRIBUTION (REGULATION) ACT, 2010 - AMENDMENTS

S No.


5 Fee paid through Demand Draft /Banker’s Cheque - filed and submitted with attachments.

Fee is now paid through online payment gateway.

6 Correspondence with the Ministry made through letters and personal visits.

Queries are now ordinarily handled through emails and a monthly meeting with the Director.

7 Offline Form FC-6, along with audited statements of accounts by 31st December every year.

Online Form FC-4 along with audited statements of accounts by 31st December every year.

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FOREIGN CONTRIBUTION (REGULATION) ACT, 2010- AMENDMENTS

S No.


8 • If Registration or Prior Permission is granted, and

• There is a receipt of Foreign Contribution in a F.Y in excess of One Crore rupees, or equivalent then

• Summary data on Receipts and Utilization of the foreign contribution to be displayed in the public domain involving the year of receipt as well as for one year thereafter.

• If Registration or Prior Permission is granted, then place the audited statement of accounts for F.Y on official website or on the website as specified by the Central Government.

• A person receiving foreign contribution in any quarter of the financial year shall place details of receipt within 15 days following the last day of the said quarter clearly indicating the details of donors, amount received and date of receipt on its official website or on the website as specified by the Central Government.

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FOREIGN CONTRIBUTION (REGULATION) ACT, 2010-OTHER COMPLIANCES

Change needs to be reported within 15 (fifteen) days through filing of Form FC- 6.

Name

Address

Nature, Aims or Objects

Bank/Branch/Account

Key Members*

Changes to be reported

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MAHARASHTRA PUBLIC TRUSTS ACT , 1950

Applicability

Procedure for Registration

Intimation of Change

Filing of Annual Budget

Renewal

Maharashtra Public Trusts (Amendment) Act, 2016

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MAHARASHTRA PUBLIC TRUSTS ACT , 1950 - APPLICABILITY

All societies registered under the S.R. Act, 1860 are converted into public trust under M.P.T. Act, 1950 after necessary inquiry and following the procedures as defined in the

rules.

Applicable on:

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• All Societies and Public Trusts, includes a temple, math, a wakf, church, synagogue, agiary or other place of public religious worship

Status

• Maharashtra.• It is also applicable in Gujarat albeit

with certain variations in the provisions in the two States

Location

MAHARASHTRA PUBLIC TRUSTS ACT , 1950 – PROCEDURE FOR REGISTRATION

Check Points:

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1

• The application to be submitted at the Office of the Charity Commissioner having jurisdiction over the region/sub-region of the state in which the trust is to be registered.

2

• The application should be made within 3 months from the date of execution of charter document, in the prescribed form

3

• An affidavit alongwith consent letter to be submitted as well alongwith other prescribed documents.

In Mumbai, registration can be done at the office of the Charity Commissioner which is at Worli Naka, Mumbai-400 018.

MAHARASHTRA PUBLIC TRUSTS ACT , 1950 – INTIMATION OF CHANGE

24

1

• It is mandatory to inform any change which occurs in the trust in respect of the trustees, moveable or immovable properties etc. within a period of 90 days

2

• The change so informed is necessary to be recorded on satisfaction of its legality and validity to the authority

3

• A change report should be filed with the department in the prescribed Schedule III..

To Dos:

Organization's with FCRA Registration/Prior permission need to report the change

within 15 days of receipt of order*.

MAHARASHTRA PUBLIC TRUSTS ACT , 1950 – FILING OF BUDGET

25

1

• If annual income exceeds 5,000/- for public religious trust and 10,000/- in other cases

2

• Prepare a budget in the form of Schedule VII-A. File the budget by 28th/29th February every year.

3

• Accounts need to be maintained through Schedule VIII (Balance Sheet) and Schedule IX (Income and Expenditure A/c)

Things to Do:

MAHARASHTRA PUBLIC TRUSTS ACT , 1950 – RECENT AMENDMENT (2016)

Must Knows:

The Deputy or Assistant Charity Commissioner may, de-register

the trust on the following grounds :

(a) when its purpose is completely fulfilled; or

(b) when its purpose becomes unlawful; or

(c) when the fulfillment of its purpose becomes impossible

by destruction of the trust-property or otherwise; or

(d) when the trust, being revocable, is expressly revoked; or

(e) when the trustees are found not doing any act for

fulfilling object of the trust.

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The Maharashtra Public Trusts (Amendment) Act, 2016 came into force on the 23rd

February 2016

LOKPAL AND LOKAYUKTAS ACT, 2013

Introduction

Applicability

Compliances and their deadlines

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LOKPAL AND LOKAYUKTAS ACT, 2013 - INTRODUCTION

The Lokpal and Lokayuktas Act, 2013, commonly known as The Lokpal Act, is an anti-corruption Act of

Indian Parliament in India which "seeks to provide for the establishment of the institution of Lokpal to

inquire into allegations of corruption against certain public functionaries and for matters connecting

them”.

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LOKPAL AND LOKAYUKTAS ACT, 2013 - APPLICABILITY

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1• It shall apply to public servants in and outside India.

2

• Includes any person who is or has been a director, manager, secretary or other officer of every other society or association of persons or trust (whether registered under any law for the time being in force or not) *

3

• *if the organisation is in receipt of any donation from any foreign source under the Foreign Contribution (Regulation) Act, 2010 in excess of ten lakhs rupees in a year or such higher amount as the Central Government may, by notification, specify.

Efforts are going on to exclude Board Members from the definition of Public Servants.

Important Points:

LOKPAL AND LOKAYUKTAS ACT, 2013 – COMPLIANCES AND THEIR DEADLINES

30

1• Have to disclose their personal assets and liabilities.

2

• In case spouse is also required to file a return, he/she shall file a return separately and mention the same in the said return. In case, spouse has procured the assets out of his/her own income, it shall still be mentioned in the said return.

3

• Immovable property includes property which has been inherited by him/her.

DISCLOSURE REQUIREMENTS:

He/she may not disclose an asset if the value of such asset does not exceed two months of his/her basic pay or rupees two lakhs, whichever is higher.

LOKPAL AND LOKAYUKTAS ACT, 2013 - APPLICABILITY

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LOKPAL AND LOKAYUKTAS ACT, 2013 – COMPLIANCES AND THEIR DEADLINES

31st December 2016 for this year.

If a public servant willfully or for the reasons which are not justifiable, fails to declare his assets or gives

misleading information in respect of such assets and is found to be possession of assets not disclosed

or in respect of which misleading information was furnished, then, such assets shall, unless otherwise

proved, be presumed to belong to the public servant and shall be presumed to be assets acquired by

corrupt means.

This shall be done through Form I-IV before 31st December 2016 for FY 2015-16. From FY 2016-17 onwards, the declaration shall have to be filed within four months after the

end of that financial year.

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DISCLOSURE DEADLINE:

INCOME TAX ACT, 1961

Corpus Fund

Anonymous Donations

Utilization of Funds

Commercial Receipts

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INCOME TAX ACT, 1961 – CORPUS FUND

Foreign Contribution received needs to be split into corpus and non corpus fund and shown separately in Schedule VC of ITR 7.

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1

• Donations made with a written direction from the donor that the donation made shall be treated as part of the corpus of the trust are not included in the total income of a trust or institution.

2

• It shall be shown separately in Schedule VC and Schedule J of ITR-7.

3

• Interest earned on investment of Corpus Fund will be treated as income of a trust or institution. Such income may be applied to charitable purposes, thereby saving it from income tax.

Key Elements:

INCOME TAX ACT, 1961 – CORPUS FUND & ANONYMOUS DONATIONS

Anonymous donations are exempt to the extent of 5% of total income or Rs 1 lakh whichever is higher.

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1

• The specific direction generally should be accompanies with the corpus donation. However, it is not a mandatory requirement. Any direction given subsequently may also be treated as valid depending upon the facts and circumstances.

2

• Inter charity donation, i.e. corpus donation by one charitable organization to another charitable organization shall be treated as valid application of funds on the part of the donor organization, and exempt in the hands of the other.

3

• Anonymous donations to the extent that they exceed Rs. 1,00,000 or 5% of total income are not normally subject to 85% application for charitable purposes, since they are taxable. Hence, they may be accumulated indefinitely.

Key Elements:

INCOME TAX ACT, 1961 – CORPUS FUND & ANONYMOUS DONATIONS

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SCHEDULE VC:

INCOME TAX ACT, 1961 – UTILISATION OF FUNDS

37

1

• Section 11 of the Act requires a trust to utilize at least 85% of its income for charitable or religious purposes, and the remaining balance is permitted to be accumulated.

2

• If it is not possible to spend 85% of the income in the same year, then a trust or institution may make an application to the Assessing Officer in Form 10 for accumulating its income for future application to charitable or religious purposes.

3

• Where income could not be spent on account of non receipt of income, a new Form 9A may be used for income of any previous year relevant to the assessment year beginning on or after the 1st day of April, 2016

Fundamentals:

All expenditure of capital nature incurred by a trust or institution shall be added to the expenditure appearing in the income and expenditure account and the same shall

be thereafter deducted from the gross income of the trust.

INCOME TAX ACT, 1961 – COMMERCIAL RECEIPTS

38

1

• Sec 2(15) has significant implications and organizations falling under the last category should be mindful of not having gross receipts from trade, commerce or business in excess of 20% of the total receipts.

2

• Separate books are required to be maintained in respect of business activities.

3

• Where the organization is engaged in various business activities then separate books for each of such activities are required to be maintained.

Preliminary Checklist:

GOVERNMENT’S PARTNERSHIP WITH NGOs

Introduction

Procedure to Apply for Grants

Reporting with NGO Darpan

39


40

NGO DARPAN:

1• Get details of existing VOs / NGOs across India

2

• Get details of the schemes of the participating Ministries/Departments/Government Bodies

3

• Apply on - line for NGO grants and Track status of your applications for grants

GOVERNMENT’S PARTNERSHIP WITH NGOs- PROCEDURE TO APPLY FOR GRANTS

41

NGO DARPAN:

1

• Create your account/sign-up and create your own User ID and Password.

2

• Select the scheme under which you want to apply for a grant. The link to your selected scheme will provide you with all the details of the scheme - format in which you have to apply, documents you need to attach etc.

3

• You can get the details of the Nodal Officers for the concerned scheme, from the website. Any queries regarding schemes or about how to proceed for schemes and grants will be clarified by the respective Nodal Officers.


Government has decided to make PAN Number of VOs/NGOs mandatory along with Aadhaar & PAN Numbers of their Board members/Office bearers.

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EXAMPLE:


43

Any VO / NGO which is registered as a trust/ society/ a private limited nonprofit Section 8 Company, can Sign Up on the NGO Darpan. As of now no Individual (person)

Registration is allowed.

EXAMPLE:


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EXAMPLE:

DEVELOPMENTS IN THE NGO DOMAIN

FCRA Related Issues

Better Internal Controls

45


FCRA Related Issues

Key Mistakes:

Association must bear in mind that registration/prior permission is sought for the sector that they want

to work in.

Not more than 50% of the foreign contributions can be utilized for the administrative purposes.

Amount cannot be transferred from FC designated bank account to domestic bank account. The same

can be treated as mis-utilisation of foreign contribution.

FC funds should not be transferred to organizations not registered under FCRA without prior

permission.

There are several other clauses which require permission/intimation, some of them being more than

50% of change in governing body members, change of name of the NGO or change of address.

A lot of Registrations were cancelled on account of Associations not filing their Annual Return.

46


Better Internal Control

Due to the massive field work involved in the NGO Sector, it is really hard to establish control on the

expense disbursements.

NGOs have recently started to adopt soft =wares in the which a person uploads the expense

receipts online which are approved /rejected by the manager.

Once approved an automatic entry is passed in the books of accounts.

Separate books of accounts are also required to be maintained on the basis of

FC Funds and Non FC Funds

Charitable Donations and Commercial Receipts

Further, it is always suggested to open a separate bank account for separate donors/projects in order

to establish a transparent flow of funds

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The number of audits being conducted by the donors in their donee organisations with respect to utilisation of the grant have reportedly increased.

Q & A SESSION

4848

4949

Disclaimer: Information presented in this document is considered private & proprietary information (unless otherwise noted) and may not be distributed or copied. We strongly recommend that you seek professional guidance and opinion before acting in any way on the proposals. While SGA makes every effort to provide accurate and complete information, various proposals may change subsequently. SGA welcomes suggestions on how to improve our services and correct errors if any. SGA provides no warranty, expressed or implied, as to the accuracy, reliability or completeness of furnished information.

Presented By : Suhel Goel FCA, CPA, B.Com (Hons.), D.I.S.A [email protected] | +91 98100

09646

mailto:[email protected]

Atma Webinar Oct 2016

Economy & Finance

Transcript of Atma Webinar Oct 2016