The non-profit, government and donor agencies like the World Bank, US Aid, etc play a significant role in shaping the human index in a developing economy, like India. In a country plagued with environmental disasters and a vast under privileged section of society especially women and children, it is essential that very citizen be social responsible. SRKA & COMPANY, believes that the improvement in the human index of the country would lead to inclusive sustainable growth that would be ourSocio-economic advantage in times to come. We combine our private-sector expertise with a deep understanding of the social and public sectors to affect lasting change and achieve socially enduring results for our clients.
- Non Profit Organizations
- Organizations for Sustainable Development
- Donor Agencies – Indian and Global
- Public Utility Companies
- Waste Management Companies
- Disaster Management Companies
- Women & Children Development Organizations
- Improvement of Literacy Organizations
Major Fiscal Incentives for Social and Public Sector
Various fiscal incentives are provided by the Government of India for promoting Social and Public Sector Some of the key incentives are outlined below:
The Income of the Social and Public organisation like NGO, Charitable Trust and Religious Trust the Income of all this are Total EXEMPT but In order to be exempt, trust is required to apply at-least 85% of its income to charitable or religious purpose in India. As per the definition provided under tax provisions, charitable purpose includes the following:
- Relief of the poor
- Medical relief
- Preservation of environment (monuments or places or objects of artistic or historic interest
- Advancement of any other object of general public utility. However, if any activity in the nature of trade, commerce or business, or any activity of rendering any service in relation to any trade, commerce or business, for a cess or fee or any other consideration is not considered to be for charitable purposes, irrespective of the nature of use or application, or retention of the income from such activity unless:
- such activity of trade/commerce/business is undertaken in the course of the actual carrying out of such advancement of any other object of general public utility and
- the aggregate receipts from such activity/ activities during the financial year does not exceed 20% of the total receipts of the said trust or institution during that financialyear
In addition, income utilised for purchase of capital asset, repayment of loan for purchase of capital asset, revenue expenditure and donation to trust registered under Section 12AA and Section 10(23C) shall also be treated as applied for charitable purposes and hence exempted from tax.
The expression ‘religious purpose’ has not been defined under the Act. Religious purposes are necessarily associated with religion and a matter of faith with individuals or communities.
Religious Purpose includes the advancement, support or propagation of a religion and its tenets. The income of a religious trust or institution is entitled to exemption, though it may be for the benefit of a particular religious community or caste. The exemption under Section 11 is available to public religious trusts only and not to trust for private religious purposes.
CLAMING TAX BENEFIT
Another way you can save tax while doing some good work is by using the deductions available under Section 80G of Income Tax Act. Section 80G of the I-T Act allows donations made to specified relief funds and charitable institutions as a deduction from gross total income before arriving at taxable income.
Be careful about which entity you donate to as you will not be able to claim any deduction on donations to entities which are not notified for this purpose by the income tax department Also, even on donations to notified entities, you can claim 100% deduction only on donations to a specified list
Impact of GST on NGOs and Charitable Trusts
There are certain criteria for a charitable trust or an NGO to be exempted from the Goods and Services Tax. The charitable trust or NGO must be registered under Section 12AA of the Income Tax Act, and the services provided by the charitable trust or the NGO must be for a charitable cause.
What is a charitable activity under GST?
The Goods and Services Act also specifies the criteria to be called a charitable activity. They are:
- Public health services, such as:
- Counseling of terminally ill persons or counseling for physically disabled
- Counseling for people affected with HIV or AIDS
- Counseling for alcohol-dependent persons
- Promoting of religion, spirituality, or yoga
- Spreading public awareness on health, family planning
- Promoting educational programs or skill development relating to:
- Physically or mentally abused persons
- Orphaned, homeless, or abandoned children
- Rural area residents over the age of 65
- Charitable services to preserve the environment (watershed areas, forests, and wildlife)
If any charitable trust or an NGO does not meet at least two of the criteria, then GST will be applicable and the entity must register under GST.
What about goods sold by a charitable trust?
Goods that are sold by a charitable trust is taxable. The charitable trust must pay the GST rate applicable while purchasing the supply.
Is GST applicable on training programs, camps, and events conducted by a charitable trust?
If a charitable trust is conducting training programs, yoga camps, or other programs that are not free for participants, it will be considered as a commercial activity and hence will be liable for GST. Even the donation received for such an activity will be liable for taxation under GST.
Services provided by way of training or coaching in recreational activities relating to arts and culture, or sports by a charitable entity will be exempt from GST.
Are the events organized by charitable trusts exempt from GST?
If trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, such activities will be considered as charitable activities and income from such supplies will be wholly exempt from GST.
What happens when a charitable trust rents out a religious place? Is there any GST on that?
GST law has chalked out GST exemptions, when a charitable trust rents out religious meant for general public (owned and managed by a registered charitable trust under 12AA of the Income Tax Act, 1961). GST will be exempted when:
- Rent out rooms are charged lesser than Rs.1,000 a day
- Kalyanamandapam or an open area is charged lesser than Rs.10,000 a day
- Rent out shops and other spaces for business are charged less than Rs.10,000 a month