Code of Taxation for NGOs (Part II)

Code of Taxation for NGOs (Part II)

Session layout

Key amendments in Finance Acts in past 3 years and implications

Finance Act 2023 Amendments for charitable entities

Finance Act 2022 Amendments for charitable entities

A. Monitoring and effective implantation

  1. Proper book of accounts to be maintained for 12AB and 10(23C) entities-form, manner and place as may be prescribed.

  2. Power to cancel registration for specified violations i.e. spent income for other than object, business income not incidental and no separate books, private religious purpose, particular religious community/caste, violation of other laws, benefits u/s 13 not reasonable, section 11(5) non-compliance, conditions not complied as specified in registration certificate (Form 10AC). Reference to be made by AO to CIT/PCIT who shall pass order cancelling or refusing within 6 months from the quarter in which notice was issued.

B. Consistency in 2 regimes with a view to have one regime in future

  1.  Accumulation of income-not spent in 5 years or taxed in 5th year itself, not 6th year and applicable to 10(23C) entities also. Delay due to court injunction etc, the period will be excluded in calculating the accumulation period. Repurposing of accumulation can be permitted by the Department.

  2. IT return and books of accounts, s.115TD applicable also for 10(23C) entities .

  3. Govt is looking at collapsing the two regimes of registration

C. Clarity

  1. Tax @30% (S. 115BBI) on denied income for 13(1)© and 13(1(d) violations. 2. Penalty for providing unreasonable benefits to specified persons- s 271AAE penalty equal to amount of benefit in first year and twice for subsequent year

  2. Provision cannot be claimed as application, actual spend/payment only is application.

  3. VC received by religious institutions for repair and maintenance of religious institutions treated as corpus and not treated as income even without specific direction from the donor from FY 20-21 but should be invested in specified modes

  4. Newly inserted section 13(10) & 13(11)-Computation of taxable income due to specified non compliance i.e. books of accounts, non filing ITR, Audit report, commercial receipts in excess of 20%. Claim admissible revenue expenditure from income subject to expenditure not from corpus, loans and borrowings, depreciation if cost claimed, donation to other organisations and after disallowing 40A(3) and 40(a)(ia) cases. Beneficial since entire income is not taxed


Finance Act 2021 Amendments for charitable entities

  1. Use of Corpus no longer application : Application for charitable or religious purposes from the corpus fund shall not be treated as application of income for charitable or religious purposes. Provided that the amount not so treated as application, or part thereof, shall be treated as application for charitable or religious purposes in the previous year in which the amount, or part thereof, is invested or deposited back, into one or more of the forms or modes specified in sub-section (5) maintained specifically for such corpus, from the income of that year and to the extent of such investment or deposit.
  2. Exclusion of Corpus Fund from Income (conditional): Any Voluntary Contribution made with a specific direction that they shall form part of the corpus of the trust or institution shall not be included in the total income of such trust or institution unless such voluntary contribution is invested or deposited in one or more of the forms or mode specified in the act.
  3. Use of Loans / Borrowings no longer applies except during repayment : Any expenditure made for charitable or religious purpose out of loan or borrowing shall not be treated as application for charitable or religious purpose. Provided such amount shall be treated as application for charitable or religious purposes at the time of repayment of such loan.
  4. Carry forward of Losses not allowed: Calculation of income required to be applied or accumulated during the previous year shall be made without any set off or deduction or allowance of any excess application of any of the year preceding the previous year

Income Tax Return & Forms

In following sequence to file:

Form 9A & Form 10:

Section 11 of the Income Tax Act 1961 provides two options when the threshold of 85% application is not met by a charitable institution.

Section 11(1): be accumulated for application in the year of receipt/next year. {Form 9A}

Form 9A can be filled in two situations:

Section 11(2):- accumulated or set apart for specific purpose for a maximum period of 5 years. {Form No. 10). Pass Board resolution for the purpose and period of accumulation and deposited in 11(5) investment mode.

Both Forms to be filed before filing of Form 10B and ITR-7 to be filed Online in prescribed application format.

Due date-2 months before due date for ITR filing although CBDT circular of May 2023 has relaxed as on or before due date of ITR filing.


Audit Report Form 10B/10BB

As per IT Rules 2023, eligibility for Audit Report in 10B is as follows:

Applicable uniformly for 12A and 10(23C) entities If 10B not applicable, 10BB to be used in very elaborate form specially 10B as against simple form earlier.


Income Tax Return (Form-ITR 7)


IT proceedings

  1. Notice u/s 142(1)-filed return but AO needs more docs/info or return not filed

  2. Intimation u/s 143(1)-assessment of ITR by CPC to determine demand/refund

  3. Notice u/s 143(1A)- Based on ITR filed, intimation for adjustment for mismatch identified during centralised processing in Form 26AS

  4. Notice u/s 143(2)-when there is discrepancy, notice for scrutiny assessment but processing of return u/s143(1) mandatory.

  5. Notice u/s 143(3)-Income Tax Assessment-Scrutiny

  6. Notice under Section 148A-income escaping assessment (3 years from end of AY in case of less than 50 lakhs and upto 10 years if more than 50 lakhs)

  7. Notice u/s 245-set off of current year refund against previous demand

  8. Penalty u/s 270(A) for concealment/under reporting of income in addition to tax

  9. Intimation u/s 154 for rectification of mistakes by AO


Objectives of TDS


TDS Sections


192 – TDS on Salary

Income Tax Slab

Tax Rate

Up to ₹2,50,000*

Nil

₹2,50,001 to ₹5,00,000

5% of total income exceeding ₹2,50,000

₹5,00,001 to ₹10,00,000

₹12,500 + 20% of total income exceeding ₹5,00,000

Above ₹10,00,000

₹1,12,500 + 30% of total income exceeding ₹10,00,000


192 – TDS on Salary

Particulars

Amount (Rs.)

Salary

6,50,000

Less: Standard Deduction

- 50,000

Gross Total Income

6,00,000

Less: Deduction under Section 80C

- 1,00,000

Total Income

5,00,000

Income Tax (@ 5% from Rs 2.5 to 5 lakh)

12,500

Less: Rebate u/s 87A

- 12,500

Net Tax Payable

Nil



New Tax Regime (Option available)

Income Tax Slab

Tax Rate

Up to Rs 3 lakh

Nil

Rs 3 lakh to Rs 6 lakh

5% of total income exceeding ₹2,50,000

Rs 6 lakh to Rs 9 lakh

10%

Rs 9 lakh to Rs 12 lakh

15%

Rs 12 lakh to Rs 15 lakh

20%

Rs 15 lakh and above

30%



194 C – Payments to Contractors

Tax is to be deducted as source:


TDS Rate:


Limit:


Section 194 C includes:-



194 J – TDS on Fees for Professional or Technical Services


Particulars

TDS Rate

Professional Fees

10%

Technical Fees

2%

Payment to call centre operator (Domestic Co. only)

2%

Threshold Exemption Limit: Rs. 30,000 /- in a financial year.



Professional & Technical services


194 I – Rent

Particulars

TDS Rate

Renting of machinery/plant/equipment

2%

Renting of land or building (including factory building) or land appurtenant to a building (including factory building) or furniture or fittings

10%

Threshold Exemption Limit: Rs. 2,40,000 in a financial year.



TDS Points to remember:


Monthly Deposit of TDS:


TAN – Tax Deduction & Collection Account Number



Interest on late deduction/deposit of TDS


Issue of Form 16/16A-TDS certificate

Deductors shall issue TDS certificate in Form No 16 / 16A generated through TIN central system and downloaded from the TIN website (TRACES) with a unique TDS certificate number in respect of sums deducted on or after the 1st April 2012 under any of the provision of Chapter XVII-B. 



Filing of Quarterly TDS Return

Period

Form 24Q (Salary)

Form 26Q (Non Salary)

April – June

31st July

31st July

July – September

31st October

31st October

October - December

31st January 

31st January 

January – March

31st May

31st May


Penalty in respect of non filing or incorrect filing of quarterly TDS return:


Penalty u/s 271H:

The penalty shall be a minimum of Rs. 10,000/- and it can be extended up to Rs. 1,00,000/-
This penalty is mandatory in nature and cannot be waived.


Anonymous donation-Section 115BBC of IT Act
Accreted Income or Exit Tax-Section 115TD of IT Act

  1. For charitable trust, if the name and address of the donor is not known, it is an anonymous donation.

  2. Not applicable to Religious Truss or charitable cum religious trust except where the donation is for an educational or medical institution

  3. Tax payable 30% plus SC and Edu cess. Threshold: Rs.1 lakhs or 5% of total donation received whichever is higher.


  1. Accreted income is excess of fair market value of assets over total liabilities of Trust

  2. Conditions when 115TD triggered:

    • 12AA registration cancelled

    • Modification of objects not applied for regn/not in line with condition of registration and application rejected

    • Merged into an entity not with similar objects and not registered under 12AA

    • Failure to transfer assets upon dissolution to another 12AA/10(23C) entity within 12 months

    • Newly added: non registration, non renewal, non conversion of provisional to regular registration wef 1.10.23

  3. Accreted income is taxed at MMR


Section 269ST: Receipt of cash donation

Finance Act 2017 restricts a person receiving Rs. 2 lakh or more in cash from a person in aggregate in a day or in respect of a single transaction or in respect of transactions relating to one event or occasion from a person. The contravention of such provision shall attract a penalty under section 271DA i.e. equivalent to the amount so received by the recipient. 

In case of receipt of cash donations by a trust (may be charitable or religious) in contravention of section 269ST, then relevant trust shall attract penal consequences.



Section 206AB of IT Act wef 1.7.2021



194 Q-TDS on purchase of goods wef 1st July 2021

Applicable to

Buyer/Purchaser

With effect from 

01-07-2021

When Deducted or collected

Payment or credit, whichever is earlier including for advance payment made

Rate of TDS/TCS

0.10%

If PAN not available

5%

Triggering point

Turnover/Gross Receipts/Sales from the business of BUYER should exceed Rs.10 cr during previous year (Excluding GST)

Purchase of goods of aggregate value exceeding Rs.50 Lakhs in P.Y. (The value of goods includes GST)

When to deposit/collect

Tax so deducted shall be deposited with government by 7th day of subsequent month

Quarterly statement to be filed

26Q




Section 206C(1)-TCS on NTFP items

  1. Seller collects from buyer tax on purchase value of specificized goods:

    1. Tendu leaves-5%

    2. Timber under or other than lease: 2.5%

    3. Any other forest produce other than a and b: 2.5%

  2. TCS u/s. 206C(1) shall not be required to be collected from a resident buyer, if the goods are to be utilised for the purpose of manufacturing, processing or producing articles or things or for the purposes of generation of power and not for trading purposes. 


Section 194R-TDS on perquisites/benefits made to service provider


A person, who is responsible for providing any benefit or perquisite to a resident, to deduct tax at source @ IO% of the value or aggregate of value of such benefit or perquisite. The benefit or perquisite may or may not be convertible into money but should arise either from carrying out of business or profession, by such resident. 

If the perquisite/benefit is estimated to be less than Rs.20k in a FY, no TDS is to be deducted.


Please note:

Effective from 1st July 2022


Lower Tax deduction Certificate (LTDC)

FAQ: Tax Deducted at Source (TDS)

For quick and efficient collection of taxes, the Income-tax Law has incorporated a system of deduction of tax at the point of generation of income. This system is called “Tax Deduction at Source”, commonly known as TDS. Under this system tax is deducted at the origin of the income. Tax is deducted by the payer and is remitted to the Government by the payer on behalf of the payee.

The provisions of deduction of tax at source are applicable to several payments such as salary, interest, commission, brokerage, professional fees, royalty, contract payments, etc. In respect of payments to which the TDS provisions apply, the payer has to deduct tax at source on the payments made by him and he has to deposit the tax deducted by him to the credit of the Government.

Tax is deductible at source at the rates given in table below :“ Rate of TDS for FY 2023-24”. If  PAN of the deductee is not intimated to the deductor, tax will be deducted at source by virtue of section ?206AA either at the rate given in the table or at the rate or rates in force or at the rate of 20 per cent, whichever is higher. Further, under section 94A(5), if payment or credit is made or given to a deductee who is located in a notified jurisdictional area, tax is deductible at the rate given in the table or at the rate of 30 per cent, whichever is higher. TDS rates for the financial year 2023-24 are given in the table at end of the FAQ

The Income-tax Act has prescribed a different threshold limit for deduction of tax at source under various sections. If the expenditure incurred/payment made during the year is below the threshold limit, then there is no requirement to deduct tax at source.

Q4. Can the payee request the payer not to deduct tax at source and to pay the amount without deduction of tax at source?

A payee can approach to the payer for non-deduction of tax at source but for that they have to furnish a declaration in Form No. 15G/15H, as the case may be, to the payer to the effect that the tax on his estimated total income of the previous year after including the income on which tax is to be deducted will be nil. Form No. 15G is for the individual or a person (other than company or firm) and Form No. 15H is for the senior citizens.  For threshold beyond 15G/H, the entity can apply for nil or concessional rate of TDS as per Section 197 of the Act. 

Q.5 What are the consequences a deductor would face if he fails to deduct TDS or after deducting the same fails to deposit it to the Government’s account?

A deductor would face the following consequences if he fails to deduct TDS or after deducting the same fails to deposit it to the credit of Central Government’s account:-

As per section 40(a)(i) of the Income-tax Act, any sum (other than salary) payable outside India or to a non- resident, which is chargeable to tax in India in the hands of the recipient, shall not be allowed to be deducted if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.

However, if tax is deducted or deposited in subsequent year, as the case may be, the expenditure shall be allowed as deduction in that year.

Similarly, as per section 40(a)(ia), any sum payable to a resident, which is subject to deduction of tax at source, would attract 30% disallowance if it is paid without deduction of tax at source or if tax is deducted but is not deposited with the Central Government till the due date of filing of return.

However, where in respect of any such sum, tax is deducted or deposited in subsequent year, as the case may be, the expenditure so disallowed shall be allowed as deduction in that year.

As per Section 58(1A) (as amended with effect from the assessment year 2018-19), the provisions of section 40(a)(ia) and 40(a)(iia) shall also apply in computing the income chargeable under the head “Income from other sources”.

As per section 201 of the Income-tax Act, if a deductor fails to deduct tax at source or after the deducting the same fails to deposit it to the Government’s account then he shall be deemed to be an assessee-in-default and liable to pay simple interest as follows:-

    1. at one per cent for every month or part of a month on the amount of such tax from the date on which such tax was deductible to the date on which such tax is deducted; and

    2. at one and one-half per cent for every month or part of a month on the amount of such tax from the date on which such tax was deducted to the date on which such tax is actually paid.

    1. Levy of Penalty

Penalty of an amount equal to tax not deducted or paid could be imposed under section 271C.

Q6. Under what circumstances a deductor would not be deemed as an assessee-in-default even after he fails to deduct TDS or after deducting the same fails to deposit it to the Government’s account?

A deductor who fails to deduct the whole or any part of the tax on the sum paid to a resident or on the sum credited to the account of a resident shall not be deemed to be an assessee-in-default in respect of such tax if such resident—

  1. has furnished his return of income under section 139;

  2. has taken into account such sum for computing income in such return of income; and

  3. has paid the tax due on the income declared by him in such return of income, and the deductor furnishes a certificate to this effect in Form No.26A from a chartered accountant.

Q7. w.e.f. 01-09-2019, will the sum paid to non-resident  be covered by above provisions? 

In such a case, the payee can claim the refund of the entire/excess amount of TDS (as the case may be) by filing the return of income.

It is the duty and responsibility of the payer to deduct tax at source. If the payer fails to deduct tax at source, then the payee will not have to face any adverse consequences. However, in such a case, the payee will have to discharge his tax liability. Thus, failure of the payer to deduct tax at source will not relieve the payee from payment of tax on his income. 

Following are the basic duties of the person who is liable to deduct tax at source.

To know the quantum of the tax deducted by the payer, you can ask the payer to furnish you a TDS certificate in respect of tax deducted by him. You can also check Form 26AS from your e-filing account at https://www.incometax.gov.in/iec/foportal

You can also use the “View Your Tax Credit” facility available at www.incometaxindia.gov.in

Q.11 At what rate will the payer deduct tax if a taxpayer doesn’t furnish a return of income?

As per section 206AB, the tax shall be deductible at the higher rates prescribed under this provision if the following conditions are satisfied:

  1. Deductee has not filed the return of income for assessment years relevant to the previous year immediately prior to the previous year in which tax is required to be deducted;

  2. The due date to file such return of income, as prescribed under section 139(1), has expired; and

  3. The aggregate amount of tax deducted and collected at source is Rs. 50,000 or more in said previous years.

Tax is required to be deducted at higher rates in respect of every sum or income or amount from which tax is deductible under any provision of Chapter XVII-B except the sum or income or amount on which tax is deductible under any of the following provisions:

However, a non-resident person who does not have permanent establishment in India or a person who is not required to furnish return of income and is notified by the Central Government shall be out of the scope of deductee for the purpose of section 206AB.

Q12. What to do if the TDS credit is not reflected in Form 26AS?

Non-reflection of TDS credit in Form 26AS can be due to several reasons like non-filing of TDS statement by the payer, quoting incorrect PAN of the deductee in the TDS statement filed by the payer. Thus, in case of non-reflection of TDS credit in Form 26AS, the payee has to contact the payer for ascertaining the correct reasons for non-reflection of the TDS credit in Form 26AS.

As per section 206AA, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax at the higher of the following rates :

However, the provisions of section 206AA shall not apply in the following cases:-

In respect of payment of interest on long-term bonds to a non-resident under section 194LC.

Where deductee being a non-resident or a foreign company, shall in respect of payments in the nature of interest, royalty, fees for technical services and payments on transfer of any capital asset, furnish the following details and documents to the deductor, namely:

Ans. As per section 206AA, a declaration in Form No. 15G or Form No. 15H is not a valid declaration, if it does not contain PAN of the person making the declaration. If the declaration is without the PAN, then tax is to be deducted at higher of following rates :

At the rate specified in the relevant provision of the Act.

At the rate or rates in force, i.e., the rate prescribed in the Finance Act. 

At the rate of 20%.

Yes, failure to remit tax deducted by you in the government’s account within stipulated time-limit would attract interest, penalty and rigorous imprisonment of up to seven years.

Yes, the tax credit in your case will be reflected in your Form 26AS and, hence, you can check Form 26AS and claim the credit of the tax accordingly. However, the claim of TDS to be made in your return of income should be strictly as per the TDS credit being reflected in Form 26AS. If there is any discrepancy in the tax actually deducted and the tax credit being reflected in Form 26AS then you should intimate the same to the deductor and should reconcile the difference. The credit granted by the Income-tax Department will be as per Form 26AS.

Yes, Finance Act, 2013 has introduced section 194-IA which provides for deduction of tax at source in case of payment of sale consideration of immovable property (other than rural agricultural land) to a resident. Section 194-IA is not applicable if the seller is a non-resident. Tax is to be deducted @ 1%. No tax is to be deducted if the consideration is below Rs. 50,00,000. If the sale consideration exceeds Rs. 50,00,000, then tax is to be deducted on the entire amount and not only on the amount exceeding Rs. 50,00,000.

If the seller is a non-resident then tax is to be deducted under section 195 and not under section 194-IA. Thus, in case of purchase of property from non-resident TDS provisions of section 195 will apply and not of section 194-IA

PAN stands for Permanent Account Number and TAN stands for Tax Deduction Account Number. TAN is to be obtained by the person responsible to deduct tax, i.e., the deductor. In all the documents relating to TDS and all the correspondence with the Income-tax Department relating to TDS one has to quote his TAN.

PAN cannot be used for TAN, hence, the deductor has to obtain TAN, even if he holds PAN.

However, in case of TDS on purchase of land and building (as per section 194-IA) as discussed in previous FAQ, the deductor is not required to obtain TAN and can use PAN for remitting the TDS.

Further in case of TDS on rent (as per section 194-IB) TDS on payment of certain sums by Individuals of HUFs (as per section 194M), and TDS on payment made for transfer of virtual digital asset by specified person (as per section 194S), the deductor can use PAN instead of TAN for remitting TDS?

Yes, u/s 195. In case you have any doubt regarding the amount on which TDS is to be made, you may file an application with the officer handling non-resident taxation who will pass an order determining the TDS to be made. Alternatively, if the recipient feels that the TDS is more he may file an application with his Assessing Officer for non-deduction.


As per the section 194IB, an individual or HUF whose books of account are not liable for audit u/s 44AB, paying rent to a resident exceeding Rs. 50,000 per month or part of the month for land or building, liable to deduct tax @ 5% at the time of credit of rent, for the last month of the previous year or last month of the tenancy in case property is vacated during the year, as the case may be, to the account of the payee or at the time of payment thereof in cash or by cheque or draft or any other mode, whichever is earlier.

Therefore, a limit of Rs. 50,000 is applicable for each co-owner separately, if rent is paid to co-owners of the property.

As per Rule 37BB, any person responsible for paying to a non-resident, not being a company, or to a foreign company, any sum chargeable to tax under the provisions of Income tax Act, 1961, shall furnish such information in Form 15CA and Form 15CB:

As per section 206C (1) every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer. Hence, amount debited to the account of buyer or payment shall be received by seller inclusive of VAT/ excise/GST. TCS to be collected inclusive of GST.

Sec 194J levies TDS on technical and professional services. As per the provisions of the Companies Act, the director of the company is also a manager and thus, a technical personnel. As per Section 194J(1)(ba), any payment made to director in the nature of sitting fees, remuneration or any other sum other than those on which tax deductible under section 192 is to be considered for deduction of tax at source @ 10% under section 194J. Further, there is no threshold limit for deduction of tax at source.

7th of the subsequent month.  For the month of March, it is 30th April.


TDS is deposited online using challan ITNS 281 on the Government portal


Period Form 24Q (Salary) Form 26Q (Non salary)
April - June 31st July 31st July
July - September 31st October 31st October
October - December 31st January 31st January
January - March 31st May 31st May

Rate of TDS for FY 2023-24

Section

Nature of transaction

Threshold Limit (Rs)

TDS Rate

192

Salary

Basic exemption limit

As per applicable slab rates

192A

Premature Withdrawal of EPF

50,000

10% rate of TDS if PAN is provided.
If EPF withdrawal is made without PAN, the applicable rate is 20%.

193

Interest on securities

2500

10% In the 2023 budget, the exemption of TDS on interest from listed debentures has been removed. This means tax must now be deducted on the interest earned from these securities.

194

Dividend

5,000

10%

194A

Interest on deposit in a bank or post office

Senior Citizens- 50,000
Others- 40,000

10% for both

194A

Interest from other sources except interest on securities and interest on bank deposits.

5,000

10%

194B

Income from lottery winnings, puzzles, crosswords, card games, etc.

10,000

30%

194BA

Earnings from online games

Nil

30%

194BB

Income from horse race

10,000

30%

194C

Payment done to subcontractor/contractor

Single transaction- 30,000
Aggregate transactions- 1,00,000

HUF/Individuals: 1%
Others: 2%

194D

Insurance commission to:


a) Individuals

15,000

5%

b) Companies

15,000

10%

194DA

Payment made towards life insurance policy

1,00,000

5%

194E

Payment to non-resident sports association/ sportsmen

No specified limit

20% The mentioned rate will be subject to an additional surcharge and a 4% cess.

194EE

Payment to National Savings Scheme

2,500

10%

194F

Payment for the re-purchase of the unit by Mutual Fund or UTI

No specified limit

20%

194G

Commission on selling lottery tickets

15,000

5%

194H

Commission/brokerage

15,000

5%

194-I

Rent:


194-I(a) plant and machinery

2,40,000

2%

194-I(b) land/building/furniture/fitting

2,40,000

10%

194-IA

Payment on transfer of immovable property except agricultural land

50,00,000

1%

194-IB

Rent paid by HUF/Individual who is not required to conduct tax audit

50,000 per month

5%

194-IC

Payment under JDA, Joint Development Agreements

No specified limit

10

194J

Fees paid for -

  • Technical services

  • Royalty in the nature of consideration for sale, distribution or exhibition of cinematographic films

30,000
30,000

2%
2%

194J

Fees paid for any other professional services or technical service

30,000

10%

194K

Earnings from units payable to a resident

No specified limit

10%

194LA

Compensation for acquiring an immovable property

2,50,000

10%

194LB

Interest paid to Non-resident on Infrastructure Debt Fund

No specified limit

5% The mentioned rate will be subject to an additional surcharge and a 4% cess.

194LBA(1)

Earnings received by a business trust from an SPV

No specified limit

10%

194LBB

Income of a unit holder from an investment fund.

No specified limit

10%

194LBC

Income from investment in securitization trust
Individuals/HUF
Others

No specified limit

25%
30%

194M

Payment of commission except income tax commission under Section 194C, 194H, and 194J

50,00,000

5%

194N

Cash withdrawal exceeding a specific amount
1 crore

1 crore

2%

194N

Cash withdrawal from multiple bank accounts during the previous year


Amount exceeding 1 crore (exceeding 20 lakhs for people not filing ITR for previous 3 years)

1 crore

2%

Aggregate cash withdrawal exceeding 20 lakhs

20 lakhs

2%

Aggregate cash withdrawal exceeding 1 crore

1 crore

5%

194O

Payment to e-commerce participant by e-commerce operator

5,00,000

1%
5% in case PAN is not provided

194P

TDS for senior citizens aged over 75 years

Basic exemption limit

Normal tax slab rates

194Q

Purchase of goods after 1.07.2021

50,00,000

0.10%

194R (Introduced in budget 2022)

TDS deducted on benefit or Perquisite to a business or profession

20,000

10%

194S

Payment of virtual digital assets

Specified Persons- 50,000
Others- 10,000

1%

195

Income on investments of NRI citizens

No specified limit

20%

195

LTCG under section 115E in the case of NRI citizen

No specified limit

10%

195

LTCG under section 112(1)(c)(iii)

No specified limit

10%

195

LTCG under section 112A

No specified limit

10%

195

STCG under section 111A

No specified limit

15%

195

Other LTCG other then LTCG mentioned u/s 112A, 10(33), 10(36)

No specified limit

20%

195

Interest paid on borrowings from Indian company or government in INR.

No specified limit

20%

195

Income from royalty, paid by Indian company/government under section 115A

No specified limit

10%

195

Earnings from royalty by government or Indian company as per an agreement according to the industrial policy.

No specified limit

10%

195

Income from royalties payable from Indian companies or the government.
Agreement should be made between 31st Mar 1961 to 1st Apr 1976

No specified limit

50%

195

Earnings from royalty to be paid by government or Indian company in pursuance of an agreement on matters included in the industrial policy
Agreement should be between 31st March 1976

No specified limit

10%

195

Earnings from technical fees to be paid by Indian government or company in pursuance of an agreement for industrial policy

No specified limit

10%

195

Income from technical fees payable by government or Indian concern in pursuance of an agreement on matters related to industrial policy
If the agreement for such payment is entered in between 29th February 1964 and 1st April 1976

No specified limit

50%

FAQ: GST for NGOs

Disclaimer: This document is intended solely for educational purposes. The content herein is subject to change based on evolving finance trends and any relevant rulings by the Government of India. Readers are advised to consult with qualified professionals for specific guidance related to their individual circumstances.

Q1. What are the criteria for a charitable trust to be exempted from GST?

There are certain criteria for a charitable trust or an NGO to be exempted from the Goods and Services Tax. The charitable trust or NGO must be registered under Section 12AA of the Income Tax Act, and the services provided by the charitable trust or the N

Q2. What is “charitable activity” under GST?

Notification no 12/2017 the term “charitable activity” has been explained. (Chapter 99 Sl. No.1)

“Charitable activities” –

(i) public health by way of,-

Q3. What about goods sold by a charitable trust?

Goods that are sold by a charitable trust is taxable. The charitable trust must pay the GST rate applicable while purchasing the supply.

Q4. Is GST applicable on training programs, camps, and events conducted by a charitable trust?

If a charitable trust is conducting training programs, yoga camps, or other programs that are not free for participants, it will be considered as a commercial activity and hence will be liable for GST. Even the donation received for such an activity will be liable for taxation under GST. Services provided by way of training or coaching in recreational activities relating to arts and culture, or sports by a charitable entity will be exempt from GST.

Q5. Are the events organized by charitable trusts exempt from GST?

If trusts are running schools, colleges or any other educational institutions specifically for abandoned, orphans, homeless children, physically or mentally abused persons, prisoners or persons over age of 65 years or above residing in a rural area, such activities will be considered as charitable activities and income from such supplies will be wholly exempt from GST.

Q6. What happens when a charitable trust rents out a religious place? Is there any GST on that?

GST law has chalked out GST exemptions, when a charitable trust rents out religious meant for general public (owned and managed by a registered charitable trust under 12AA of the Income Tax Act, 1961). GST will be exempted when:

Resource material for NGOs on GST

Key definitions under CGST Act 2017 for NGOs to know:

  1. Section 2(84) defines the term “person” which include Trusts, Societies and all types of artificial juridical person

  2. Sec 2(17) defines “Business” which includes  any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

  3.  Section 2(28) defines “Consideration” as monetary value or payment for an activity. Payment is Not Consideration. The act of mere payment, and/or undertaking to pay arising out of a contract towards any assistance, without getting anything in return or supply in any form in return cannot be called as consideration

  4. Section 7 (1) defines scope of supply to include: 

    • all forms of supply of goods & services or both, such as sale, transfer, barter, exchange, license, rental, lease or disposal made/agreed to be made-VC/corpus not supply, no specified beneficiaries.

    • Consideration-provided a grant is linked to beneficiaries/implementing partner/ donor

    • in the course of furtherance of business-Grant is a legal obligation and not income. Also incidental activity would be excluded if primary activity is charitable

  5.  Levy & Collection-As per section 9(1) of CGST Act, Tax is leviable on  the supply of Goods/Services or both on the value determined under section 15 and at such rates as prescribed under various schedules of the Act

Architecture of GST

  1. GST is destination based consumption tax. Benefit of tax (STCG/ UTGST) will accrue to the consuming state

  2. When supply of goods/services happens within a state called intra-state transactions, then both the CGST and SGST/UGST will be collected. 

  3. if the supply of goods or services happens between the states called inter-state transactions, then only IGST will be collected.


cgst sgst igst

Illustrated: 

GST:

How GST operates

(a) The inter-state supplier in the exporting state is allowed to set off the available credit in IGST, CGST and SGST/UTGST against the IGST payable on inter-state supply made by him. 

(b) The buyer of importing state in inter-state supply can avail the credit of IGST paid on purchase from the output tax payable. 

(c) The exporting state transfers to the center the credit of SGST/ UTGST utilized for the payment of IGST. 

(d) The Centre transfers to the importing state the credit of IGST used in payment of SGST/UTGST.


Type of supply

a. Supplies taxable at a ‘NIL’ rate of tax (0% tax)-milk, grains, salt

b. Supplies that are wholly or partially exempted from CGST or IGST, by way of a notification amending CGST/IGST Act

c. Non-taxable supplies– supplies that are not taxable under the Act-Alcoholic liquor for human consumption, petrol.

Rates of levy

Input Tax Credit

GSTR 1

GSTR 2B

GSTR 3B

The filing frequency of GSTR-3B is currently as follows:

GST under RCM

Composition scheme under GST

HSN and SAC

HSN code and SAC code are the codes used to classify goods and services under the GST regime in India.

HSN means Harmonized System of Nomenclature code used for classifying the goods under the GST, Goods and Service Tax.

The SAC code means Services Accounting Code under which services fall under GST are classified.

HSN code has 8 digits and SAC code has 6 digits 

E way bill and E invoice