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5 things you must do at the start of Financial Year in NGO

New Financial Year has just started, and everyone is busy in closing books of accounts of last year. Sometimes, the closing of financial year is done in the month of June or July. If Accounts and Finance running from one financial year to another as it is, without change, sooner or later, it will become absolute. So, this is my advice that at least follow this 5 things at the beginning of the Financial Year.

1. Annual Budget

NGO has establish to fulfill a mission with the vision in mind. And to achieve that, one needs long term plan which breakdown in a yearly column. That is called Annual Budget.  Now a days, its a trend that from big funding agency to CSR companies to small donors, everyone asking whether you have prepared Annual Budget or not. The right time for the preparation of Annual Budget for NGOs is in the Last week of March or first week of April, not later than that. Read this blog on Annual Budget.

 

2. Changes in Multi-Year Projects

If you  have multi year project, most likely budget of such project will change with the change in financial year. Mostly salaries and staff payments have incremental components and increase in the next financial year. Thus, Accountant must have to ascertain such changes in new financial year  in particular budget and should communicate to program team well in advance.

 

3. Update Financial Manual

Financial Manual is a policy document and need to review every year. Every year, there are many changes in laws and regulations which affects the financial transactions of your organization. Generally, accountant used to start following the new laws and regulation but forget to modify Financial Manual Accordingly.

Example

Cash Expenditure limit was decreased from Rs. 20000 to Rs. 10000. But still many NGO has the limit of Rs. 20000 in their Financial Manual. Nobody bothers to read and update it.

 

4. Splitting Tally Database

Mostly, Accountants in NGOs are lazy to split Tally company and whereby separating database according to Financial Years.  I have seen many NGO accounts, where tally database is same since last 8 to 10 years. Obviously, because of this, size of database increase and speed to work in Tally getting slow to worse. So, It is advisable to split the tally company at the end of the Financial Year.

 

5. Chart of Accounts

Chart of Account is the base of accurate accounting and desirable presentations of Income & Expenditure Accounts and Balance Sheet of NGOs. As, compared to corporate, NGO do not have standard format for its Financial Documents. I observed, that accountant creates and alters ledger accounts as and when required. So, this is one of the important point to follow at the start of the Financial Year to prepare Chart of Accounts or modified according to the need.

 

Did I miss something?

Hope this will help you in your NGO, if you have any question,  you can ask here or chat with us. Also your comments are welcome on the above subjects.

 

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Step to Step process to get 80G Certificate

What is Sec 80G ?

Under this section, donor gets benefit of Tax Exemptions from his income, if he has donated to Organisation, having 80G Certificate.

Benefit to Donor

1. Its a charity and satisfy donor with sense of “giving”.
2. For Tax Exemption, 50% of the amount of donation will be exempt from Income Tax limiting to 10 % of Gross Income.

Benefit to Organisation

1. 80G approved NGOs get more donations.
2. Though it is not mandatory to have 80G certificate, many Funding Agency prefers 80G approved Organisations for funding.

Procedure :-

Application need to be filled in Form No 10G by Online mode only. Follow below steps to apply for 80G with the following documents.

Keep below documents/information ready

1. Copy of Registration Certificate.
2. Copy of Trust Deed / Society Deed/MOA.
3. Copy of PAN.
4. Copy of 12A Certificate or Acknowledgement of application of 12A.
5. Copy of last 3 years Audit Reports, if any.
6. Note on Activities for last 3 years, if any.

Notes :-

1. All the above copies must be self-attested by authorized person.
2. If certificate is in vernacular language, then get it translated in English and notarised it.

16 Steps for 12A Application

Step 1. Go to this website

https://www.incometaxindiaefiling.gov.in/home
Click on “Login”.

Step 2. Fill Login Details

Enter UserID = Organisation PAN.
Enter Password.
Enter Captcha.
Click “Login” .

Step 3. Go to “e-File”

Click on “Income Tax Forms”.

Step 4. Select Form Name = “Form No 10G …”

Step 5. Select Submission Mode = “Prepare and                      Submit Online”

Step 6. Fill General Information of Form

Click on tab “Form 10A”
Fill General Information – Name, Address, Email, Mobile etc..

 Step 7. Fill Trustee/Board Members Details

Step 8. Fill Applicable Details

Fill these other details whichever is applicable to your Organisation.

Step 9. Fill Detail of Signing Authority

Name, Address, Phone, Email etc..

Step 10. Preview the Form

Download draft form in PDF and check correctness of details.

Step 11. Upload Documents

Upload scan copies of relevant documents.
Click on “Submit” button in the bottom.

Step 12. E-Verification of Form

There are three options to e-verify this form.
1. If you have already generated EVC (E-Verification Code).
2. If you do not have EVC, click this, it will email you OTPs.
3. If you select AADHAR Option, OTP will be sent to Auhtorized
person Mobile linked with AADHAR.

Step 13. Acknowledgement

After verification as above, a Transaction ID has been provided. Note down that.
Also acknowledgement has been sent to given email address.
Take a print of it and keep it in file for future reference.

Time

Generally, within 15-30 days, a query raised by Assessing Officer asking for more documents or explanation.
Sometime, even Assessing Officer asked for personal visit by trustee or authorized person for explanation, if reqired.
Mostly within 2 to 3 months, Certificate of 80G has been issued.

Consequences

If, NGO do not have 80G certificate, donor can not get exemption
from tax from their Income and thus fund raising activity
certainly affected without 80G certificate.
Points related

Points related to Donation Receipts

1. Donation Receipt must contain – Date, Pre-printed serial number, Name and address of NGO, Name of Donor, Amount in figure and word, Mode of payment, Purpose of Donation, 80G certificate number and sign and seal.

2. It is advisable to have hardbounded receipt book with preprinted
serial number for good internal control system.

3. Trust can have multiple receipt books. But need to justify, why
it is necessary to have multiple receipt books.

4. It is advisable to issue receipts for each and every donation.

5. Also, keep PAN of Donor as a proof that it is not anonymous donation if asked by Assessing Officer.