4. No single legislation to comprehensively governs the sector and
similarly no single regulator exists in India,
Subject of concurrent list => Different legal provisions at national
and state level,
Distinction of caste, colour and creed not permitted in formation of a
charity,
In general, formal registration not mandatory.
18th April 2015HDS & Co. Chartered Accountants 4
5. Section 2(15) of IT Act –
“charitable purpose" includes relief of the poor, education, medical relief,
preservation of environment (including watersheds, forests and wildlife)
and preservation of monuments or places or objects of artistic or historic
interest, and the advancement of any other object of general public utility:
Provided that the advancement of any other object of general public utility
shall not be a charitable purpose, if it involves the carrying on of 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, irrespective of the nature of use or
application, or retention, of the income from such activity:
Provided further that the first proviso shall not apply if the aggregate
value of the receipts from the activities referred to therein is twenty-five
lakh rupees* or less in the previous year;
18th April 2015HDS & Co. Chartered Accountants 5
6. Section 9(1) of the Bombay Public Trusts Act, 1950
charitable purpose includes:
1) relief of poverty or distress,
2) education
3) medical relief
3A) provision of facilities for recreation or other leisure time occupation
(including assistance for such provision), if the facilities are provided in the
interest of social welfare and public benefit, and
4) the advancement of any other object of general public utility, but does
not include a purpose which relates exclusively to religious teaching or
worship.
18th April 2015HDS & Co. Chartered Accountants 6
7. Section 9(2) of the Bombay Public Trusts Act, 1950
Facilities will be considered to be provided in the interest of social welfare
if –
a) The facilities are provided with the object of improving the conditions
of life for the persons for whom the facilities are primarily intended, and
b) either those persons have need of such facilities as aforesaid by reason
of their youth, age, infirmity or disablement, poverty or social and
economic circumstances, or the facilities are to be available to the members of
the public at large
Section 9(3) of the Bombay Public Trusts Act, 1950
provision of facilities at village halls, community centres and women
institutes, and provision and maintenance of grounds and buildings to be
used for purposes of recreation and leisure time occupation
18th April 2015HDS & Co. Chartered Accountants 7
8. Section 20 of Societies Registration Act, 1860 –
Charitable societies,
Military orphan funds,
Societies established for the promotion of science, literature, or the fine
arts,
For instruction, the diffusion of useful knowledge, the diffusion of political
education,
For the foundation or maintenance of libraries or reading rooms for general
use among the members or open to the public, or public museums and
galleries of paintings and other works of art, collections of natural history,
mechanical and philosophical inventions, instruments, or designs.
18th April 2015HDS & Co. Chartered Accountants 8
9. Section 8 of Companies Act, 2013 –
Company having in its objects the promotion of commerce, art, science,
sports, education, research, social welfare, religion, charity, protection of
environment or any such other object;
intending to apply its profits, if any, or other income in promoting its
objects; and
intending to prohibit the payment of any dividend to its members.
FCRA, 2010 –
A person having definite cultural, economic, educational, religious or social
programme can receive FC only after obtaining certificate of registration or
prior permission from the Ministry of Home Affairs.
18th April 2015HDS & Co. Chartered Accountants 9
10. Indian Trusts Act, 1882
Bombay Public Trusts Act, 1950
Societies Registration Act, 1860
Companies Act, 2013
Income Tax Act, 1961
Foreign Contribution Regulation Act, 2010
18th April 2015HDS & Co. Chartered Accountants 10
12. Application u/s. 18 in Schedule II giving details of –
Proposed name of the trust,
Name of the trustees and managers with their addresses,
Mode of succession to trusteeship and managership,
Objects of the trust,
Details of documents creating the trust along with copies,
Details of scheme relating to trust, along with copies,
List of movable property with estimated value of each class of such
property,
Details and estimated value of immovable property along with complete
identification with certified copies of entries in the records of city
survey record or municipal record relating to the properties
18th April 2015HDS & Co. Chartered Accountants 12
13. Sources of income of trust
Average gross annual income
Average annual expenditure
Amount of average annual expenditure on remuneration to trustees and
managers, establishment and staff, religious object, charitable object,
and miscellaneous items
Particulars of encumbrances on trust property
Particulars of title deeds pertaining to trust - property and the names of
trustees in possession thereof
Communication address of trustee
Affidavit by trustees making the application
Consent letter signed by other trustees
18th April 2015HDS & Co. Chartered Accountants 13
14. Court-fee stamp of Rs.100 to be affixed on application
Application fees to be paid ranging from Rs. 3 to Rs. 25. depending
on the value of the property
Application to be made to the jurisdictional Regional Deputy or
Asst. Charity Commissioner within 3 months of creation of trust
Formal hearing is conducted for verification of details and thereafter
the certificate of registration is issued
Within 3 months of creation of trust, file memorandum in Form IIA
containing details of immovable property to the jurisdictional Sub-
registrar under the Indian Registration Act.
18th April 2015HDS & Co. Chartered Accountants 14
15. Application u/s. 12A in Form No 10A along with –
Original copy or certified copy of trust deed, with one copy thereof.
If the trust/institution is created otherwise than under an instrument,
documents evidencing the creation of trust/institution, with one copy
thereof,
Where the trust/institution has been in existence during any year(s) prior to
financial year in which application, two copies of accounts of
trust/institution relating to prior year or years (maximum 3 years
immediately preceding the year in which application is made)
Application to be made to Principal Commissioner or
Commissioner, who will pass the order accepting or rejecting the
application within 6 months from end of the month in which
application is made.
18th April 2015HDS & Co. Chartered Accountants 15
16. Points to considered when making an application –
there should be a legally existent entity, which can be registered;
it should have a written instrument of its creation or written document
evidencing its creation;
all its objects should be charitable or religious in nature;
its income and assets should be made applicable towards objects only,
mentioned in the object clauses, and Rules and Regulations;
no part of its income should be distributable or distributed, directly or
indirectly, to its members, directors or founders, related persons or relatives
etc. claiming through them; and
in case of dissolution, its net assets after meeting all its liabilities, should
not be revertible or reverted to its founder, members, directors or donors
etc., but used for the objects
18th April 2015HDS & Co. Chartered Accountants 16
17. Application for 80G to be made in Form 10G along with -
Copy of registration granted under section 12A or copy of notification
issued under section 10(23) or 10(23C);
Note on activities of institution or fund since its inception or during the
last three years, whichever is less
Copies of accounts of the institution or fund since its inception or during
the last three years, whichever is less.
Application has to be made in triplicate
Within 6 months from date of application, commissioner shall either
accept the application and grant a certificate specifying the year or
years for which it is valid or reject the application after giving an
opportunity to be heard and recording reasons in writing.
18th April 2015HDS & Co. Chartered Accountants 17
18. An Application in Form FC-3 required to be submitted online to the
Foreigners Division of Ministry of Home Affairs.
Hard copy of the same, duly signed, to be submitted within 30 days
of online application alongwith –
Certified copy of registration certificate or Trust deed, as the case may be;
Details of activities during the last three years;
Copies of audited statement of accounts for the past three years (Asset and
Liabilities, Receipt and Payment, Income and Expenditure);
Copy of PAN
Fees of Rs. 2,000/-
If the application is incomplete, it will be rejected.
18th April 2015HDS & Co. Chartered Accountants 18
19. If the specified conditions are satisfied, the registration certificate or
prior permission is to be granted within 90 days from date of receipt
of application
In case the certificate or permission is not granted within 90 days,
the same shall be communicated along with reasons to the applicant.
Normally, registration is granted to persons existing for three years
or more, with at least Rs. 10 lakhs of spendings on its purposes
during the three years.
Registration certificate is valid for 5 years, after which it must be
renewed by making application in Form FC-5
18th April 2015HDS & Co. Chartered Accountants 19
20. Specified conditions include –
The applicant should not be
Fictitious or benami,
Prosecuted or convicted for conversion from one religion to another, or for
creating communal tension or disharmony,
Found guilty of misutilisation of funds,
Engaged in propogation of sedition,
Likely to use FC for personal gains,
In contravention of any provisions of FCRA
The applicant should have undertaken reasonable activity in the chosen
field or should have prepared a reasonable project for the benefit of the
society,
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21. In case of an individual, the individual, or in case of any other person,
its directors or office bearers, should not have been convicted under any
law or any prosecution for any offence should not be pending against
them,
Acceptance of FC should not be likely to affect prejudicially –
The sovereignty and integrity of India,
Security, strategic, scientific or economic interest of India,
Public Interest,
Freedom or fairness of any election,
Friendly relation with any foreign state,
Harmony between various castes or communities,
Acceptance of FC should not lead to incitement of an offence or
endanger the life or physical safety of any person.
18th April 2015HDS & Co. Chartered Accountants 21
22. Application for prior permission to be made online in Form FC-4 –
Hard copy of the same, duly signed, to be submitted within 30 days
of online application alongwith –
Certified copy of registration certificate or Trust deed
Commitment letter from foreign donor specifying the amount of foreign
contribution
Copy of the project report for which foreign contribution is solicited/ being
offered
Copy of the PAN
Fees of Rs. 1,000/-
Each Prior permission application should be for receiving a specific
amount, for a specific purpose and from a specific donor.
18th April 2015HDS & Co. Chartered Accountants 22
24. Intimate details of any changes to Charity commissioner within 90
days of change –
In Schedule IIIA where the change relates to immoveable property,
In Schedule III in all other cases
Prior permission of Charity commissioner required in case of –
Further investment in immoveable property, and
sale, exchange, gift of any immovable property, lease exceeding a
period of 3 years in case of non-agricultural land/building, lease
exceeding 10 years in case of agricultural land
Prior permission of Charity commissioner required for lending
moneys to the trustee.
18th April 2015HDS & Co. Chartered Accountants 24
25. Contribution payable to Public Trust administration Fund @ 2% of
gross annual income less deductions prescribed u/r. 32
Gross annual income excludes corpus donations
Prescribed deductions –
Donations received from other public trusts and dharmadas
Grants received from government & local authorities
Interest on sinking and depreciation fund
Amount spent for secular education/or medical relief/veterinary treatment
of animals
Expenditure incurred from donations for relief of distress caused by natural
Calamity
Deduction of land revenue, rent payable to landlord, cost of production out
of income from land used for agricultural purpose
18th April 2015HDS & Co. Chartered Accountants 25
26. Deductions of municipal taxes, ground rent, cesses, insurance premia,
repairs @10% of gross rent of let out buildings out of income from land
used for non agricultural purposes
Cost of collection of income or receipts from securities, stock etc. @1% of
such income
Deduction in respect of repairs of building (yielding no income) @10% of
estimated gross annual rent.
Trusts exempt from payment of contribution –
Public trusts having gross annual income of Rs. 25000 or less.
Public trusts exclusively for advancement/propagation of secular education/
medical relief/veterinary treatment.
Recognized public libraries and reading rooms.
Trusts exclusively for purpose of relief of distress caused by natural calamity.
18th April 2015HDS & Co. Chartered Accountants 26
27. Budgets to be prepared in Schedule VIIA and submitted to the
Charity Commissioner one month before the commencement of the
accounting year –
In case of public religious trust, if annual income exceeds Rs. 5,000,
In case of other trusts, if annual income exceeds Rs. 10,000
Accounts to be maintained and Balance sheet to be prepared in
Schedule VIII and Income and Expenditure Account in Schedule IX
Accounts to balance on 31st March every year
Trust having annual income exceeding Rs. 15,000 has to get
accounts audited.
18th April 2015HDS & Co. Chartered Accountants 27
28. Audit should be completed within 6 months of close of accounting
year and filed with Charity Commissioner within a fortnight of the
audit.
Trusts exempt from audit must file details of income in Schedule IX-
A and Details of expenditure in Schedule IX-B within 3 months of
close of accounting year.
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29. FC received should be deposited only in the designated FC bank
account.
Association should keep record of all FC clearly indicating the
names of donors, their locations and the purpose for which it has
been received.
FC can be treated as Corpus donation only if it is supported by
written consent of the donor.
Donation received through donation box should be treated as FC if it
has been received in foreign currency.
10th January 2015HDS & Co. Chartered Accountants
30. FC should be utilized for the purpose it has been received.
Not more than 50% of the FC received should be utilized for
administrative expenses, except with the prior approval of the
Central Government.
It cannot be invested in speculative business. However, it can be
invested in Bank/ Govt approved financial institutions which
guarantee a fixed return.
Every asset purchased should be in the name of association
Interest earned on FC should also be utilized towards its activities/
projects.
10th January 2015HDS & Co. Chartered Accountants
31. FC cannot be transferred to any person who have not obtained
registration or prior permission.
However, upto 10% of the total FC received in a financial year, may
be transferred to any person who has not been granted registration or
prior permission, only after obtaining the permission of the Central
Government.
Such an approval is not required if payment is made to Self Help
Groups or individuals for whose benefit the amount is received or if
FC received is for providing direct financial assistance as charity.
For extending loans to Self Help Groups, approval of the
Government is required.
10th January 2015HDS & Co. Chartered Accountants
32. Associations are required to maintain a separate set of account or
records exclusively for the FC received and utilized.
Any standard or acceptable method of accounting can be used for
maintaining books of account for FCRA purposes
All accounting statements, annual return and statement of account
from the bank of the designated FC account should be preserved at
least for a period of six years.
Associations should maintain separate register of investments and
every register of investment must be submitted for audit.
10th January 2015HDS & Co. Chartered Accountants
33. Interest on FC should be shown as a secondary FC received in the
year in which it is earned.
Proper accounts should be maintained to show apportionment of
expenditure between local funds and FC.
A foreign security is not a permissible investment under the IT Act
and should be liquidates and converted into funds or assets.
Association receiving FC in excess of Rs. One Crore in a financial
year are required to place the summary data on receipts and
utilization of the FC for the year of receipt as well as for one year
thereafter in the public domain.
10th January 2015HDS & Co. Chartered Accountants
34. The association should submit annual report in Form FC-6
accompanied by Audited Statement of Accounts for every financial
year within nine months of the end of the financial year
The report should be duly certified by a Chartered Accountant.
Form FC-6 should be accompanied with a copy of duly certified
statement of FC account from the bank
Filing of report is a must even if no FC has been received during a
financial year.
10th January 2015HDS & Co. Chartered Accountants