Income Tax : Deduction U/s 35 AC
NGO can register itself u/s 35AC from the Central Government of India. Potential donors get 100% exemption for the amount donated towards 35AC. All NGOs should avail the advantage of this provision to attract potential donors.
How it is important for NGOs
Contributions made to a project/scheme notified as an eligible project or scheme for the purpose of section 35AC of the Income Tax Act, would entitle the donor to a 100% deduction of the amount of such contribution. Unlike the certificate granted u/s 80G, the certificate u/s 35AC is not given to any organization as a whole, but only to an eligible and approved projects. If general donation is made to a large multi-purpose trust, the donor would not be entitled to the 100% deduction unless he specifies that the amount has been given towards the project or scheme notified as an eligible project or scheme for the purpose of section 35AC of the Income Tax Act. Eligible projects and the schemes for exemption u/s 35AC include one or more of the following:1. Construction and maintenance of drinking water projects in rural areas and in urban slums, including installation of pump-sets, digging of wells, tube-wells and lying of pipes for supply of drinking water 2. Construction of dwelling units for the economically weaker sections 3. Construction of school buildings, preliminary for children belonging to the economically weaker sections of the society4. Establishment and running of non-conventional and renewable source of energy systems5. Construction and maintenance of bridges, public highways and other roads6. Pollution control projects7. Promotion of sports8. A weighted deduction of 125% is also allowed for contributions to organizations approved under section 35(1)(ii) (a scientific research institute or a university, college or other institution) specifically for "scientific research," and for contributions made under section 35(1)(iii) specifically for "research in social science or statistical research." If an NGO succeeds in getting such an approval for its projects then it stands a very good chance of mobilizing funds from the corporate and the business sector. Business houses making contribution to such approved projects are allowed to show an amount of donation as expenditure in their regular books of accounts. Role of National CommitteeThe Central Government has constituted a National Committee to identify projects and schemes to be notified under section 35AC, such committee normally consists of eminent persons. All NGOs are entitled to apply to the National Committee to get its projects or schemes approved.
How to apply for 35AC
1. The application for approval by the National Committee should be made to the
National Committee for Promotion of Social & Economic Welfare,
Dept. of Revenue,
Govt. of India,
New Delhi - 110001.2. The Application has to be submitted along with following documents:
A. The application is to be made in 2 Sets, written either in Hindi or English.
B. Name, address and status of applicant NGO, the district/ ward circle where assessed / PAN number.
C. Audited Balance Sheet, Profit& Loss Account or Income& Expenditure Account for last three years.
D. Give details about its constitution such as whether it is registered as a trust, society, etc supported by relevant documents like trust deed, rules & regulation, memorandum of association etc. and registration certificate, if any.
E. Name & Addresses of signatories of NGO, including those who left the organization but were managing the affairs of the organization during last 3 years of date of application.
F. If the organization is notified under section 10(23) (C) or is approved for the purposes of section 80G, give particulars of such approvals granted.
G. Brief particulars of activities of the NGO during last 3 years of date of application.
H. Such other information as the organization may like to present to National Committee.
I. Additional Information Regarding the Project/Scheme to Be Submitted:
(i) Title of project or scheme;
(ii) Date of commencement;
(iii) Duration and the likely date of completion;
(iv) Estimated cost of the project ;
(v) Category or class of persons who are likely to be benefited from the project or scheme;
(vi) Affirmation that no benefit from the project or scheme other than remuneration or honorarium, will accrue to persons managing the affairs of the NGO ;
(viii) Such other particulars as the applicant may place before the National Committee.3. Certificate should be issued to the Donor:
All approved NGOs need to issue a certificate to the donor for all contributions & receipts under section 35AC. The certificate is to be issued in Form 58A (given below).4. This certificate required for the donor to claim exemption from its taxable income. Further, the NGOs should also send an Annual Report to the National Committee indicating the progress of the work relating to the project/scheme and the following information in respect of each contributor:
i) Name of the contributors & their addresses.
iii) Amount of contributions.
iv) The project/scheme for which the contribution is made.
v) Total amount of contribution received during the year.
vi) Total cost of the project approved by the National Committee.
Such Annual Report should reach the National Committee by 30th June, after finishing the financial year in which the amount is received. Click Here for Form 58A.