Amendments in Budget 2015 related to NGOs
Major Two changes are proposed to made in the definition of “Charitable Purpose”. One to include YOGA with other activities like Medical and Education and second Business activity limit is rationalize. Another change is to aim at curbing irregularity of filling of Income Tax Return of NGO by making it mandatory to accumulate part of the income. Let us discuss one by one in detail.
Yoga is now included in the definition of Charitable Activity
Honorable FM has proposed to include “YOGA” as sixth item in the definition of Charitable Activity after “Education” activity. Let us understand this provision, this means any organization having main object of “YOGA” can get full exemption of its income, even though income earned from Business Activity related or not with YOGA.
Example :- A Gym Trainer wants to start a Gym. If he, instead of registering as Firm or Company, registered a Trust and get certificate of exemption u/s. 12A, having main object of Teaching Yoga, then all the Income is exempted, weather it is from activity of Teaching yoga or normal exercise and gym activities.
Business Activity of Trust
It is proposed by Honorable FM that Charitable Organization engaged in Advancement of any other object of General Public Utility can have incidental business activity up to the limit of 20% of Gross Receipts of the Organization. Earlier it was Rs. 25 Lacs for all the organization. This is a good effort to make this provision rationalize.
Accumulation of Income
Under Section 11, Organization can accumulate their part of Income for utilization in future years. To exercise this option, Organization has to file Form 1o to Assessing Officer along with Income Tax Return with resolution stating such accumulation of income. However due to lack of clarification, Time limit was not fixed for filling such Form 10 and return. Now Honorable FM has proposed that this type of Accumulation of Income is permitted only if Income Tax Return of NGO is filled with in time limit i.e. 30 September.
Few Other Changes
Under Section 35, words “Principal Chief Commissioner or Commissioner” inserted to whom feasibility report is to be submitted. Under section 80G, donation to “Swachh Bharat Kosh” and “Clean Ganaga Fund” are added.
Inserting Yoga activities in the charitable definition may reduce unnecessary legal litigation regarding that but on the other had Government has to create such mechanism so that business activity behind the mask of Yoga can be traced and properly taxed.