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Understanding Income Tax Regulations for NPOs: PAN, TAN, and Tax Exemption Guidelines

This comprehensive guide provides essential information for Non-Profit Organizations (NPOs) regarding income tax obligations, including the application process for Permanent Account Number (PAN) and Tax Deduction Account Number (TAN). Key topics include the conditions for tax exemptions under Section 12A and 80G, filing annual tax returns, maintaining proper financial records, and tackling issues related to business-like activities within NPOs. Learn about essential forms, audit requirements, and compliance to ensure your organization meets all regulatory obligations.

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Understanding Income Tax Regulations for NPOs: PAN, TAN, and Tax Exemption Guidelines

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  1. Income tax

  2. NPO Taxation

  3. PAN / TAN • Permanent Account Number (PAN) • Form 49A • Apply before filing return • 7-10 days Tax Deduction Account Number (TAN) • Form 49B • Apply when deducting Tax

  4. 12A Exemption Conditions Charitable activities Minimum spending 85% Arm’s length transactions with key persons Keeping funds in approved modes Filing tax return annually

  5. Unspent Funds?

  6. Key Person Payments

  7. Annual Tax Return

  8. New ITR 7

  9. Audit Report

  10. Donations

  11. 80G Approval

  12. 35AC Approval

  13. Anonymous donations

  14. Special Issues

  15. Business-Like Activities

  16. The Charitable Trunk 12A 80G 10(23)(c) 35AC Donor Incentives I Tax Exemption Charitable Purpose

  17. Sec. 2(15)

  18. Dealing with 2(15) • Ensure business is • Incidental • Gross revenue ≤ 25 lakh • If not, spin off as a separate organisation • Form of organisation? • For-profit forms • NPO w/o tax exemption

  19. Incidental Business • Incidental? • Only activities connected with main objects • Gross Business Turnover • Any amount for first five categories • ≤ 25 Lakh for Sixth Category

  20. Business: Accounting/ Audit • Separate books of account – sec. 11(4A) • Attach Audited P&L A/c • Transfer profit to main I&E A/c • Form 3CD audit report if • Fees Turnover > 25 lakh • Sale Turnover > 1 crore

  21. Further Reading Accountable 15 : Basics of Tax Registration Accountable 16 : Income Tax Return Accountable 91 : Income Tax Exemption Accountable 141 : Charitable purpose and Income Tax Auditable 2 : Charitable Purpose - 1 Auditable 3 : Charitable Purpose - 2 Accountable 142 :Eleventh Commandment Accountable 143 : Taxation Tricks and Traps Auditable 12 : Taxing NGO Programs Outside India

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