Amendments for NGO by Finance Bill 2020
Finance bill 2020 brings various different kind of amendment which was never expected by industry. The amendment relating to Non Profit Organisation (herein after called as NGO) is also falls in same category. The Finance bill 2020 restricts the validity of registration obtained by NGO upto 5 years. Prior to amendment by finance bill 2020, such registration was valid for life time (once approved then there is no renewal required) unless withdrawn. Following are the key amendments which will impact NGO:
For Existing NGO/NPO:
- After amendment every non profit organisation (NGO) who is availing benefit u/s 10(23C) or 12AA or 80G will apply for fresh registration (re-registration) between 1st June 2020 to 31st August 2020 i.e. window will be open for 3 months in which NGO are required to submit application
- After amendment NGO can apply for only one registration either u/s 10(23C) or 12AA, previously then were enjoying benefit under both sections.
- Income Tax Department is liable to pass an order for such approval within three months from the date of application.
- Such approval shall be valid for 5 years. Further application for renewal after five years must be made at least 6 months prior to the expiry of the five year’s validity period.
- NGO’s who have approval u/s 80G will submit list of donor (statement) to the income tax department and he benefit of 80G shall be available to donors on the basis of information relating to donation furnished by the corresponding charitable trust or institution. However as of now, frequency of such statements is not yet prescribed.
- After amendment, donation upto INR 2000 will be allowed in cash. Before amendment this limit was INR 10,000.
- The Government of India also proposes to create a “National Register” of all charitable and religious institutions and the Income Tax Department will issue a Unique Identification Number to all charitable and religious institutions.
For New NGO or NGO who are applying for exemption first time:
- Where an organisation which does not started charitable or religious activity then such NGO can apply for provisional registration u/s 12AA and/or 80G. If an organisation is applying for first time for registration u/s 12AA and/or 80G and does not commenced charitable or religious activity then he will be given a provisional registration. Such provisional registration will be valid for 3 years.
- Such provisional registration (u/s 12AA and/or 80G) holder shall make a fresh application for registration at least 6 month prior to the expiry of the provisional registration (12A and/or 80G) or within 6 month of commencement of its activities, whichever is earlier.
- If organisation (NGO) is apply for registration after commencement of charitable or religious activity then it will be granted for general registration which will be valid for 5 years.
After these changes, Non Profit organisation will face certain challenges as their compliance cost will increase because they have to apply for registration/renewal again. Further they will be liable to submit statement (information of donor in prescribed format) in which they have to submit details of donors which will lead to incremental cost and a time consuming activity.