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