India’s non-profit sector is experiencing a significant shift in its tax and regulatory landscape. To help you navigate these changes, we’ve compiled essential information on filing taxes for non-profit organizations, aligning with the Income Tax Act, 1961, and the Foreign Contribution Regulations Act, 1999.
Registration Renewal Every 5 Years
Non-profit organizations must apply for registration renewal and issuance of 80G donation receipts every five years. Life-time registrations are no longer applicable, and renewal applications should be submitted six months before the five-year expiry.
Introduction of Forms 10B and 10BB
Mandatory submission of audit reports in Form 10B and Form 10BB from the financial year 2022-23 onwards. Form 10B is required for trusts exceeding Rs 5 crore income, those receiving foreign funds, or investing income outside India. Form 10BB necessitates detailed disclosure in audit reports.
Tax Treatment of Donations to Other Charities
Effective from FY 2023-24, only 85% of eligible donations to another trust are considered. This aims to prevent misuse where non-profits create multiple trusts and circulate donations, retaining 15% at each level.
Restrictions on Donations between Non-Profit Entities (FY 2017-18 onwards)
Donations of corpus by one non-profit to another are prohibited. Non-profit entities can donate non-corpus only from the current year’s income to another non-profit.
Mandatory Investment of Corpus Contributions (FY 2021-22 onwards)
Voluntary contributions forming the corpus must be invested as per section 11(5) of the IT Act.
Electronic Reporting of Donations (FY 2021-22 onwards)
Mandatory filing of reports in Form 10BD for all types of donations. Issuance of system-generated donation receipts in Form 10BE to donors for claiming deductions under Section 80G.
Extended Deadline for Form 9A and 10 (FY 2022-23 onwards)
Filing deadline extended by two months for Forms 9A and 10. Required to be filed at least two months before the income return filing deadline.
FCRA Amendments
Charitable organizations must obtain FCRA registration for accepting foreign contributions. Foreign contributions must be used for the receiving organization’s purposes and cannot be donated to other FCRA-registered entities.
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