Skip to main content

35 AC Registration- Fund raising by Social Enterprises/Non-Governmental Organizations (NGOs)

Section 35 AC of the Income Tax Act, 1961, is one of the key provision which is relevant for raising funds and resources for NGO’s if understood and used effectively.
The objective of Section 35 AC is to encourage business organizations to contribute more in social and economic welfare and upliftment of general public. With the increased emphasis on the corporate social responsibility in the corporate sector and ostentatious display of charity by people like Bill Gates and Warren Buffet, the contribution in the monetary term by the corporate sector in India towards socially relevant project cannot be undermined.
NGO’s 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 fulfil their objective of development.
Corporates simultaneously can fulfil their corporate social responsibility aspect of the business by contributing towards the eligible projects and gain by availing deduction under Section 35 AC. Thus Section 35 AC can be used as an effective tool of fund raising by the NGO’s. It can also lead to a mutually beneficial relationship between NGOs and the Corporate Sector.
SECTION 35AC
Section 35 AC provides that where a person or company incurs any expenditure by way of payments of any sum to :
Ø  A public sector company or;
Ø  A local authority or;
Ø  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 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. In view of NGO’s, the approved association or institution by National Committee can raise funds for their approved from the eligible persons and donors can avail the benefits of tax deductions
Eligible persons to make contributions
Persons eligible to make contributions include:
Ø  An individual;
Ø  A Hindu Undivided Family;
Ø  A Company;
Ø  A Firm;
Ø  An Association of persons or Body of Individuals, whether incorporated or not;
Ø  A Local authority;
Ø  Every artificial juridical person not falling within any of the preceding sub-clauses.
The Section 35AC of the Income Tax Act, 1961 allows deduction from the income of the assessee on payments made to eligible organizations and the donors will get this benefit. To avail deduction under Section 35AC, all assessee other than companies should make payment to outside agencies only, whereas companies have the option of either making payment to outside agencies or they can incur expenditure themselves.
Procedure for making an application for approval of a project or scheme by the National Committee:
In case an applicant wishes to include a project or scheme for promoting the social and economic welfare of public or uplift of the public as ‘Eligible Project or Scheme’, then an application has to be made to National Committee which should contain the following particulars and be accompanied with relevant documents:
Ø  Title of project or scheme, date of commencement, duration and likely date of completion;
Ø  Estimated cost of project or scheme duly supported by a copy of the resolution of the Managing Committee of the applicant;
Ø  Classes of persons who are likely to be benefited from the project or scheme;
Ø  Affirmation that no benefit from the project or scheme, other than remuneration or honorarium for whole time or part-time work done or for reimbursement of actual expenses related to the project will accrue to the persons managing the affairs of the association or institution
The eligible projects includes:
  1. Family Welfare and immunization 
  2. Tree plantation 
  3. Social Forestry 
  4. Development of Irrigation Resources 
  5. Rural Sanitation - Construction of low cost latrines 
  6. Medical camps in rural areas 
  7. Rural Health Programs 
  8. Land development and recovering of waste land with special concern on ecological improvement 
  9. Soil and water conservation including harvesting of run off water 
  10. Non formal education and literacy, especially for children and women 
  11. Rural and non farm activities. 
  12. Creation of employment opportunities for urban and rural population living below the poverty line. 
  13. Supportive services for women to engage in productive work (Children care of working women) 
  14. Leprosy eradication 
  15. Promotion of sports 
  16. Construction of dwelling units for the economically weaker sections 
  17. Construction of school building for children belonging to the economically weaker sections of the society 
  18. Establishment and running of non-conventional and renewable sources of energy systems.
  19. Any other program for uplift of the rural poor or the urban slum dwellers.

Working Structure of National Committee for 35 AC Registration



Documents requisite for 35AC Registration
    1. Bye Laws of NGO
    2. Copy of Registration Certificate;
    3. Copy of resolution with date & seal of the NGO, passed by the Board to undertake the work under S.35 AC of the IT Act;
    4. A brief note on Proposed Project;
    5. Brief note on past activities & credentials of Management with details of experience in activities similar to the object of proposed project;
    6. Information regarding  availability of land/infrastructure to execute the project /land documents to be enclosed;
    7. Expenditure incurred as on date on the proposed project;
    8. Blue prints along with professional cost estimates in support of construction activities;
    9. Income criteria for selection of beneficiaries/services to poor/weaker section of the society;
    10. Information regarding recognition of school/training etc. from the concerned education/technical board;
    11. Details of similar activities undertaken by NGO & the accomplishments/achievements etc.;
    12. Annual Reports & Audited Balance Sheets for last 3 financial years;
    13. Activity Reports of last 3 years;
    14. Approval under Section 12 A & 80G of IT Act;
    15. Approval under FCRA, if any
For any 35AC registration, please contact at admin@equicorplegal.com /+91 9958709189


Comments

Popular posts from this blog

Non-Banking Financial Companies (NBFC)

A Non-Banking Financial Company (NBFC) is a  company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company). Advantages of NBFC a)it can provide loans and credit facilities, b)it can trade in  money market instruments c)it can do wealth management such as Managing portfolios of stocks and shares d)it can underwrite stock and shares and oth…

Nidhi Companies in India

This article enumerates the brief transaction procedure involved in the establishment of a Nidhi Company and the laws relating to Nidhi Company in force in India. It shall be noted that the activities described hereunder covers various relevant legislations, regulations and rules, for the time being in force in India and the legal entity has to obtain approval/register itself with Ministry of Corporate Affairs (“MCA”).
Preface In the Indian financial sector, Nidhi Company refers to any mutual benefit society notified by the MCA. They are created mainly for cultivating the habit of thrift and savings amongst its members. The amount of business conducted by Nidhi Companies is not as big as commercial banks or deposit taking Non-Banking Finance Companies. Nidhi Companies are highly localized and mostly single office institutions. They are also referred to as mutual benefit societies, because they accept deposits and give loans to only their own members; and membership is limited to individ…

Types of Companies under New Companies Act-2013

With new testament of Corporate law in force has introduced several different types of companies with special features.
ONE PERSON COMPANY (OPC) One Person Company is defined in Sub- Section 62 of Section 2 of The Companies Act, 2013, which reads as follows: 'One Person Company means a company which has only one member' It shall also be important to note that Section 3 classifies OPC as a Private Company for all the legal purposes with only one member. All the provisions related to the private company are applicable to an OPC, unless otherwise expressly excluded. ØOnly a natural person who is an Indian citizen and resident in India- üshall be eligible to incorporate a One Person Company; üshall be a nominee for the sole member of a One Person Company. ØNo person shall be eligible to incorporate more than a One Person Company or become nominee in more than one such company. ØNo minor shall become member or nominee of the One Person Company or can hold share with beneficial interest. ØT…

SEBI VS PACL: Trouble in Paradise

In its biggest-ever crackdown on a large-scale money pooling scheme estimated at nearly Rs. 50,000 crore (twice the amount to be recover from SAHARA group), regulator SEBI has ordered  Pearls Agrotech Corporation Limited (“PACL”) to refund investors within three months and wind up operations. SEBI had found PACL violating Collective Investment Scheme Regulations by mobilizing the money without being registered with the regulator, SEBI. Besides, closure of PACL operations, SEBI  is initiating further proceedings against PACL and its nine promoters and directors for fraudulent and unfair trade practices, as also for violation of SEBI's CIS Regulations, among others, as per a direction from the Supreme Court. At present, it is being estimated that PACL has more than 58.5 million customers, more than twice the 22 million demat accounts in the entire country and has paid commission of
Rs 7,893.8 crore up to March 2012  to more than its 8 lakh agents who works as network of chain system fo…

NBFC & Companies Act 2013 w.r.t. issue of Debentures

With the new testament of corporate law, Companies Act, 2013 to be effective from April 01, 2014, NBFC are facing lack of oxygen supply for their survival as to ensure that debenture issuances did not trespass into the domain of public deposits and were beginning to understand that optionally convertible debentures market will die out slowly that the rules have thrown language open to interpretation. Section 71 of the Companies Act, 2013 along with the rules implies that the debenture issuances have to be secured by specific moveable and immoveable properties. NBFCs may face a rocky time in finding these specific moveable and immoveable properties for issue of secured debenture.  Section 71 of the Companies Act, 2013 states that – 1.A company may issue debentures with an option to convert such debentures into shares, either wholly or partly at the time of redemption: Provided that the issue of debentures with an option to convert such debentures into shares, wholly or partly, shall be ap…

Nidhi Companies Rules 2014- An analysis w.r.t. Nidhi Company Registration

“Nidhi is a company formed with the exclusive object of cultivating the habit of thrift, savings and functioning for the mutual benefit of members by receiving deposits only from individuals enrolled as members and by lending only to individuals, also enrolled as members” -Section 406, Companies Act, 2013 & Companies Rules 2014
Nidhi Company are registered or formed only for the benefit for its members only, an outsider i.e. who is not the member of the Nidhi Company is not allowed to deposit any money or doing any kind of business with the concerned Nidhi Company. In this article we will analyze the impact of Nidhi Companies Rules 2014 on the registration of Nidhi Company Incorporation of Nidhi Company i)A Nidhi Company to be incorporated under the Companies Act, 2013 (“Act”) shall be a public company and with a minimum paid up equity share capital of five lakh rupees; ii)On and after the commencement of Companies Act, 2013, no Nidhi Company shall issue preference shares; iii)Except as…

SEBI VS SAHARA

In Sahara Desert- Distress Hours Once upon a time, Sahara’s Subrarta Roy- a friend to all who came calling-whether a matinee idol in his 80s or a sports star in her teens, self bestowed title- “Sahara Shri”- the sponsor of the Indian cricket team and a group headed by a colourful, flamboyant CEO hobnobbing with Bollywood stars and cowbelt politicianscould boast of having friends in high places. Today in this distress hours, there seems to be few people who he can turn to in his hour of distress. For the sleepy Lucknow of the 1990s whose favourite past-time seemed to be reminiscing the city’s long gone glory days, Subrata Roy Sahara brought a cash of heavy bling and some more. Sahara has stayed afloat for more than 35 years despite repeated regulatory onslaughts. The first setback was in the late '90s when RBI slashed the discretionary investment powers of its finance firm. The next blow came in 2006 when its depository services firm had to be shut down. The big jolt came in 2008 whe…