NGOs can avail more funding for carrying out their activities by providing 35AC Exemption benefit to the Donors
Donor can get 100% exemption of amount Donated to 35AC Approved organization, as in case 80G Certificate Donor get 50% exemption of Donation amount from their taxable Income
The objective of 35AC Registration is to encourage business organisations to contribute more in social and economic welfare and upliftment of general public.
In order to promote reinvestment of business profits in areas where massive capital input is required for socio-economic development, a tax incentive has been provided under
NGOs involved in eligible projects notified by the Central Government for promoting the social and economic welfare can raise resources for eligible project from corporate sector and fulfill their objective of development.
SECTION 35AC OF THE INCOME TAX ACT, 1961
Section 35AC allow for full deduction of the entire amount paid by a taxpayer carrying on a business or profession for financing projects or schemes promoting social and economic welfare.
Section 35AC can build a linkage between corporate sector and the NGO sector in terms of raising of resources and its utilisation in socially relevant projects.
Section 35AC provides that where a person or a company incurs any expenditure by way of payments of any sum to
- a public sector company or;
- a local authority or;
- to an association or institution approved by the National Committee
for carrying out any eligible project or scheme for promoting the social. and economic welfare or upliftment of the public as the Central Government may specify, then the amount so paid shall be allowed as deduction from the business income of the assessee/ contributor of such amount.
Section 35(1)(ii) in The Income- Tax Act, 1995
Any sum paid to a scientific research association which has as its object the undertaking of scientific research or to a university, college or other institution to be used for scientific research. Provided that such association, university, college or institution is for the time being approved for the purposes. Such association, university, college, or other institution is approved according to the prescribed guidelines and is notified in the Official Gazette by Central Government.
Section 35(1)(iii) in The Income- Tax Act,
Any sum paid to a university, college or other institution to be used for research in social science or statistical research: Provided that such university, college or institution is for the time being approved for the purposes of this clause by the prescribed authority' by notification' in the Official Gazette.
BENEFITS OF FCRA PRIOR REGISTRATION
NGOs can avail more funds by registering itself under Section 35AC of the Income Tax Act, 1961.
Section 35AC of the Income Tax Act, 1961, allows deduction from the business income of the assessee on payments made to eligible organisations.
WHO CAN UNDERTAKE ELIGIBLE PROJECTS AND SCHEMES
- an association
- an institution
- a public sector company
- a local authority
- A company, which is a taxpayer may avail of this deduction either by way of payment to the above mentioned entities or directly by undertaking an eligible project or scheme.
ELIGIBLE PERSONS TO MAKE CONTRIBUTIONS
- an individual;
- a Hindu Undivided family;
- a Company;
- a firm;
- To an association or institution approved by the National Committee
- a local authority;
- every artificial juridical person not falling within any of the preceding sub-clauses
CONDITIONS NECESSARY FOR APPROVAL
- The association or institution is; constituted as a public charitable trust.
- registered under the Societies Registration Act, 1860 (Act 21 or 1860) or under any law corresponding to that Act, registered under section 25 of the Companies Act, 1956 / Section 8 of Companies Act 2013.
- Persons managing the affairs of the association or institution are persons of proven integrity;
- The activities of the association or institution are open to citizens of India without any distinction and are not for the benefit of any individual or community;
- The association or institution maintains regular accounts of its receipts and expenditure;
- The instrument or the rules or regulations governing the association or institution do not contain any provision for the transfer or application at any time, of the whole or any part of its income or assets for any purpose other than a charitable purpose.
WHAT IS AN ELIGIBLE PROJECT OR SCHEME
An eligible project or scheme is one, which the Central Government on the recommendation of the National Committee, may so notify in the Official Gazette. It should relate to one or more of the following:-
- construction and maintenance of drinking water projects in rural areas and in urban slums, including installation of pump-sets, digging of wells, tube wells and laying of pipes for supply of drinking water;
- construction of dwelling units for the economically weaker sections;
- construction of school buildings primarily for children belonging to the economically weaker sections of the society;
- establishment and running of non-conventional and renewable sources of energy systems;
- construction and maintenance of bridges, public highways and other roads;
- Promotion of sports;
- Pollution control;
- Any other programme for uplift of the rural poor or the urban slum dwellers, as the National Committee may consider fit for support, like:-
- Family welfare and immunization.
- Tree plantation
- Social forestry
- Development of irrigation resources
- Rural sanitation-construction of low –cost latrines
- Medical camps in rural areas
- Rural health programmes
- Land development and reclamation of waste land or degraded land with special emphasis on ecological improvement
- Soil and water conservation including harvesting of run off water
- Non-formal education and literacy, especially for women & children
- Rural non-farm activities
- Creation of employment opportunities for urban and rural population living below the poverty line
- Supportive services for women to engage in productive work (care of children of working women by providing an improved environment, care and food and by establishing crèches/balwadis, etc.)
- Leprosy eradication