Question

1 year ago Anonymous Question 1: Briefly discuss the following topics: ACCOUNTING FOR NONGOVERNMENT NONBUSINESS ORGANIZATIONS: COLLEGES AND UNIVERSITIES, HOSPITALS AND OTHER HEALTHCARE ORGANIZATIONS Reply

Answer 1

Section 11 & 12 Exemption has been provide to charitable trust and only section 10 (1) and 10(23c) deduction avilable all other under section 10 not available :

Section 40 A(3) if expense exceed Rs. 10000 in cash paid to any person in a day then not claimed expense in application of income.

Section 40 A (3A) if cash payment made to such person specified in this section then expense should be allowed.

Section 40 a(ia) if TDS not deducted of resident person then deduction not allowed 30 % of expense incurred in application of income. .

Definition under section 2 (15) Charitable Trust -

charitable purpose includes the following:

* Relief poor

* Education

* Yoga

* 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:

1. 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
2. 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 financial year

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.

Charity is a voluntary help either in money or kind to the needy. Hence, there are various Non-Governmental Organizations (NGOs) and non-profit entities constantly working on charitable activities by raising funds all over the world by forming either an institution or trust.

Section 80G deduction being a significant one.

Accounting of NGO Colleges and universities , hospital and other healthcare organisation :

Donation/Voluntary contribution are provided following are :

1. Voluntary Contribution with a specific direction to form part of corpus of trust or institution are exempt does not part of total income .

2.  Voluntary Contribution without a specific direction to form part of income form property held under trust has been set apart does not exceed 15% without any condition has been used. .

If a trust or institution is unable to apply 85% of its income from property held under them, the income is still exempt if the conditions are met :

• The income is deemed to have been applied for charitable purposes in specified scenarios
• 85% of income is neither applied not deemed to have been applied, the trust is allowed to accumulate such unapplied portion of income under specified conditions to claim the exemption.

a) Income deemed to have been applied

1. The whole or any part of the income has not been received during the previous year; or
2. For any other reason;

the assessee has an option to:

1. apply such income referred to in clause (i) for such purposes during the previous year in which it is received or during the previous year immediately following the said previous year
2. apply such income referred to in clause (ii) for such purposes during the previous year immediately following the previous year in which the income was derived.

Such option is to be exercised by furnished form 9 A electronically with or without digital signature by the trust within the time allowed for filing return of income u/s 139 (4A).

b) Accumulation of 85% of income of trust

If a minimum of 85% of the income of trust or institution has not applied or deemed to have been applied as above, it is allowed to accumulate or set aside. And such income shall be exempt, if following conditions are satisfied :

1. Such trust or institution furnishes Form No. 10 – notice of accumulation of income by charitable trust or institution electronically on or before the due date for filing the return of income
2. Mention the purpose for which income is being accumulated or set aside
3. Income shall not be accumulated for more than 5 years and years in which income accumulated or set aside due to order or injunction of any court to be excluded in computing 5 years
4. Money so accumulated or set aside is invested or deposited in specified mode.

If Anonymous donation where donee does not maintain record of identity/any particular of donor then taxable at the rate 30%.

Anonymous donation deduction has been provided higher of the following for not taxable at the rate 30% but taxable at normal rate applicable for trust :

• 5% of total donation received by trust
• Rs.1,00,000

Donation received by religious trust has been exempt from all incomes.