Income Tax Provisions and Exemptions for NGO’s

Written By Sushma Singh


The Income-Tax Act specifically lays down a mandatory provision for a trust to make an application for allotment of the permanent account number to the Assessing Officer in form number 49A of Income-tax Rules.

Not making an application for a permanent account number by the trust institution makes it liable for being penalized up to Rs. 10000 for the default. It should, therefore, make an application immediately on registration of trust or institution.

Income Tax Provisions and Exemptions for NGO’s


The Trust Institution should make an application for allotment of tax deduction account number to the Assessing Officer, in form number 49B of Income-Tax Rules immediately on registration of the trust or institution and quote the same on all the challans for payment of sums under section 200 on all the TDS certificates and all the returns delivered under section 206, 206A and 206B. A penalty of Rs. 10,000/- has been prescribed by section 272 BB in case of failure to do so.


Where the total income of the trust or institution (without giving effect to the provisions of section 11 and 12) exceeds the maximum amount which is not chargeable to income tax in any previous year, the accounts of the trust or institution for that year should be audited by a chartered accountant. The report of the audit in Form No. 10B should be furnished along with the return of income for that year.

The Taxation Laws (Amendment) Act, 2006 has amended this provision to provide that audit would be required when the total income of the trust or institution exceeds the maximum amount not liable to tax, i.e., Rs. 1 lakh at present. Further, charitable trust or institution whose total receipts including voluntary donation, a donation towards corpus, income from rent, interest, etc., is less than Rs. 1 lakh in the previous year would also not be required to file their returns as under the provisions of Section 139 (4A) only those trusts and institutions are required to file returns whose total income including voluntary donations, contribution towards corpus exceeds the maximum amount not chargeable to tax.

4. Filling of Income Tax Return Before Due-date

The public religious and charitable trust and institutions claiming exemption of their income under the provisions of section 11 of the Income-tax Act are required to file their returns of income in Form No. 3A. the Income-tax Act grants complete exemption in respect of the income derived from property held under trust or other legal obligation wholly for charitable or religious purposes, or in part only for such purposes, subject to certain conditions.

The total income for this purpose has to be computed under the Income-tax Act without giving effect to the provisions of sections 11 and 12. The due date for filing return in case the accounts of the trust are audited is 31st October and 31st July in all other cases. It may also be noted here that where a charitable trust does not file the return of income as required by section 139 (4A), it loses its exemption. A trust is also entitled to revise the returns of income tax filed by it, within the time prescribed under section 139 (5), if it discovers that there has been an error or mistake in the original return. The revised return can be filed within one year from the end of the relevant assessment year.

5. What is the Application and Accumulation of Income?

The exemption is limited to the extent to which such income is applied in India or outside India as the case may be. Is it necessary that the entire income should be so applied? The Act gives a concession here. It is possible to claim the exemption even if the trust institution applies only 85 percent of the income derived from the trust property for the purpose of the trust, during the relevant previous year.

An accumulation not exceeding 15 percent of the income from such property is permissible. For computing, this 15 percent, voluntary contributions referred to in Section 12 shall be deemed to be part of the income. It must be clearly noted that accumulation must be with the object of application of the accumulated amount to charitable or religious purpose in India at a later date. Such a facility for accumulation is not available for those trusts whose income is to be applied outside India.

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