AccountAid Capsules 2001 (1-58)

In USA, all tax-exempt NGOs have to file form 990 with the Internal Revenue Service. This form is open to public for inspection and must be provided on request.

The form includes extensive information on income, expenditure, assets, and liabilities as also remuneration of five top officers and five top consultants.

The US law allows the NGOs to make the form available on its web site instead of mailing to each person who asks for it.

Quite sensible: World Vision's latest form 990 runs into 69 pages! And this, when USA has a law called Paperwork Reduction Act, 1995!

2: Trust regulation in India

(5-May-01)

Unlike Societies, there is no law governing public charitable trusts in India. They are governed by civil law. Indian Trusts Act, 1882 applies only to private trusts.

Public trusts are formed by simply registering the trust deed with a court registrar. They also register under Income Tax Act to get tax exemption.

However, trusts in Maharashtra and Gujarat are governed by Bombay Public Trusts Act, 1950.

3: Regulation of Charities in UK

(6-May-01)

All charities in UK must register with the Charity Commission for England and Wales. They must also file an annual return and accounts. Copies of the accounts can be obtained by public. The Commission also has supervisory and investigative powers. The Commission's register of charities is open to public and can be searched through the internet (http://www.charity-commission.gov.uk/).

Some charities are exempt from registration. These include friendly societies, industrial / provident societies, and charities with annual income less than 1000 British pounds (~ Rupees 70,000).

4: The Number System

(8-May-01)

The Western numerals (1,2,3, ...0) used throughout the world today originated in India. From here, these passed to the world through Arab scholars. These are, therefore, known as Arabic or Hindu-Arabic numerals. The Arabs themselves called these as Hindu figures (Al-Arquan-Al-Hindu). There are also visual similarities between the current Devangari (Indian) symbols and the Western (English) numerals.

The numerals for 1-9 were developed in India by 200 BC. The numeral for zero was developed around 500 AD. These traveled to Baghdad along with Arab merchants on the monsoon winds

(According to Ginsburg, a Hindu scholar named Kanka from Ujjain was invited to Baghdad for this purpose by Abbaside Khalif Al Mansur). From Baghdad, these spread to Europe, which was then using the cumbersome Roman numerals (III, IX, XXXIII, etc.).

[Sources: The Dawn of Indian Civilization, edited by G.C. Pande. 1999. Published by PHISPC; pp. 672-673.

IslamiCity.com http://islam.org/mosque/ihame/Ref6.htm

Ginsberg: ‘New Light on Our Numericals’ Bulletin of the American Mathematical Society, Vol.25, 1919, pp.366-9

Encyclopaedia ‘Britannica 2001’ Deluxe Edition CD Rom: Entry titled ‘Khwarizmi, al-‘]

5: Gratuity & NGOs

(9-May-01)

A small example of how things change. Gratuity originally meant a voluntary payment or a gift. It is now enforced by law! Thus, in India, all societies or Trusts with 10 employees or more come under Payment of Gratuity Act, 1972. This happened through a notification (S.O. 228 dated 20-Aug-1997) in 1997.

Further, they must take a policy from Life Insurance Corporation of India to cover this liability. Certain trusts (which have an approved gratuity fund) do not have to take the LIC policy.

(Incidentally, this law applies to profit-oriented sector as well.)

6: FCRA & Gujarat Earthquake

(11-May-01)

FCRA rules have been relaxed for Gujarat Earthquake relief. You can receive the money and then apply in form FC-1A. Approval will be almost automatic. Right?

Right. But only till 31st May 2001. The relaxation (see Gujarat_Earthquake_FCRA_ITax.htm), which was valid till 31st March 2001, has been extended to 31st May (MHA press release dated March 28, on their web-site).

7: FCRA and the Purpose of Registration

(17-May-01)

Indian NGOs registered under FCRA (Foreign Contribution Regulation Act, 1976) for social work cannot take up religious activities. Similarly, religious groups (missions, ashrams etc.) registered for religious work cannot take up social work.

So if you want to do both, then you must say tick both at the time of applying for FCRA registration.

8: Last date for filing Income Tax Return

(30-May-01)

Last date for filing the Income Tax Return by NGOs remains unchanged as 31st October. The proposed change (31st July) has been withdrawn by the Finance Minister.

However, this is valid only if the NGO's income exceeds Rs.50,000 and they are filing an audit report in form 10B. For other (smaller NGOs), the last date remains 31st July.

9: Build-up to FCRA amendment…

(31-May-01)

In October 2000, Mr. Vidyasagar Rao, Union Minister of State for Home Affairs said:

"... the Centre was firm that foreign funds were properly used considering that they would cross the Rs. 4,000 crore mark during 2000-01. It would be detrimental to national interests if the money was misused.

He asserted that the Centre had no proof of misuse of these funds by some organisations for religious conversions. But, 11 such recipients had issued advertisements denouncing the Vajpayee Government before the last Lok Sabha poll following which they were placed in the list of outfits, which required permission for receiving funds. The organisations subsequently apologized for having indulged in activities of political nature.

Mr. Rao said the amendment was also necessitated by the fact that several organisations were utilizing the funds, furnishing accounts much later and approaching his Ministry for condoning the delay."

[Source: The Hindu, 2-Oct-2000]

10: FCRA amendment round the corner?

(31-May-01)

Probably. The Centre is proposing to amend FCRA to make sure:

1. NGOs maintain proper accounts;

2. District Collectors or Deputy Commissioners can keep a watch over the NGOs;

3. FC funds are not used for political purposes;

This information comes from Mr. Vidyasagar Rao, Union Minister of State for Home Affairs (The Hindu, 30-May-2001). He had said this earlier also in October 2000 at Hyderabad (The Hindu, 2-Oct-2000)

11: Last date for filing FC-3

(1-Jun-01)

There has been no change in last date for filing FC-3. The last date remains unchanged as 31st July.

[FC-3 is the annual return for foreign contributions received by Indian NGOs.

Over the last couple of weeks, several NGOs have been asking whether last date for filing FC-3 has changed.

12: Foreigners on your campus?

(1-Jun-01)

Inform the local Police Station whenever you have a foreigner staying in your house, office or campus.

According to other press reports in The Times of India:

1. This is an old standing order. The Government plans to enforce it more strictly.

2. You have to report only if the foreigner stays with you for 24 hours or more. Rule covers house, office, campus, etc.

3. You can phone in the details to local Police Station.

[Source: MHA Press Release dated 8th May 2001, see below]

INTIMATION REGARDING PRESENCE OF FOREIGNERS

This is for the information of General Public that as per Foreigners (Report to Police) Order, 1971, made under the Foreigners Act, 1946 (31 of 1946), every householder or other person shall report to the Officer-in-charge of the nearest Police station about the arrival or presence in his household or in any premises occupied by him or under his control of any foreigners, if he knows or has reasons to believe that he is a foreigner.

Non-Compliance of this order would attract punitive action under the Foreigners Act, 1946 (31 of 1946) i.e. imprisonment upto a period of five years or with fine or with both.

13: FC Receipts in 99-00

(4-Jun-01)

In 99-00, FC Receipts came to Rs.3,810 crores.

This is higher than 98-99 (Rs.3,403 Crores) by 12%.

However, the rate of growth has come down: in 98-99, the receipts had grown by 18.8%.

[Source: Statement of Mr. Vidyasagar Rao, Union Minister of State for Home Affairs. Published in The Hindu, 30-May-2001]

14: Funding to BIMARU States

(5-Jun-01)

In 99-00, following FC Receipts were reported (in Rupees Crores):

Delhi 572; Tamil Nadu 554; Andhra 531; Karnataka 420; Kerala 366; and, Maharashtra 351.

What about the BIMARU states? We have information on two of these (Rupees crores):

Bihar 109; and, Uttar Pradesh 107.

While Bihar's inflow has risen by 9%, UP shows a drop of 20%.

[Source: Statement of Mr. Vidyasagar Rao, Union Minister of State for Home Affairs. Published in The Hindu, 30-May-2001]

A crore is equal to 10 million. A US Dollar fetches 47 Rupees). There are four BIMARU states: Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh. The acronym BIMARU sounds similar to the Hindi word 'bimar', which means ill or unwell. FC is short for foreign contribution. The above is a partial listing out of a total receipt of Rs.3,810 crores. FCRA state-wise classification is not very accurate as funds are passed on from Agencies in one state to NGOs in another.

15: Publishing your accounts

(8-Jun-01)

NGOs with receipts / income of Rs. 1 crore (10 million) or more should publish their accounts in a local newspaper. This applies from financial year 2001-02 onwards. If they don't do this, they will lose their income tax exemption.

This also applies to clubs, temples, churches, gurudwaras, traditional Trusts, universities, hospitals etc. -- in short, any non-profit organization which enjoys income tax exemption under section 12 or under clauses (iv), (v), (vi) or (via) of section 10(23C).

16. Fund-raising by Congress

(10-Jun-01)

Congress is planning to raise a corpus of Rs.50 crores through graded subscriptions from members, ticket-seekers, public and corporate houses.

It also plans to get funds from NRIs. However, FCRA does not allow this. Therefore, Congress is planning 'to set up a foundation to organize political education and training'. Funds from non-resident Indians will presumably be taken into the Foundation, after the Foundation gets FCRA clearance.

[Source: The Hindu, Delhi edition. June 10, 2001]

17. FC and non-FC

(12-Jun-01)

Indian citizens living abroad can send donations to Indian NGOs without attracting FCRA. There is no upper or lower limit on this.

However, foreigners (including former Indian citizens) living in India or abroad are on a different footing. They can not give funds / material to Indian NGOs who do not have FCRA registration or permission.

The type of currency (Rupees or dollars) does not matter in either case.

18. FCRA items below Rs.1000

(12-Jun-01)

Are items below Rs.1,000 in value exempt from FCRA?

No. These are exempt only when received as a gift for personal use. Personal gifts can be given to individuals, not to organizations.

19: 125% deduction from Income

(14-Jun-01)

Responding to the endless calls of 'Yeh Dil Mange More[1]' from fund-raisers and donors...

Under section[2] 35(1)(iii) you can offer 125% deduction from taxable income to your donors.
This extra benefit is available to donors who have business or professional income.
Other donors can claim 100% only under section 80GGA(2)(aa).
Organizations doing research in social sciences or doing statistical research are eligible for approval under section 35(1)(iii) by the CBDT.

For more information, see AccountAble 61.

20: National Committee for 35AC

(15-Jun-01)

A new committee has been notified for approving projects under section 35AC. The committee has a three-year tenure beginning 21st May 2001. Justice R.S. Pathak (former CJI) continues as Chairman.

Names of other members and additional information on 35AC is available in AccountAble 17. Follow the AccountAble link from www.AccountAid.net

[Indian NGOs approved under 35AC of the Income Tax Act, 1961 can offer 100% deduction from taxable income to their donors.]

21: Fraud Warning for Charities

(16-Jun-01)

The Charity Commission in UK has posted the following information on its web-site:"Charities in the UK are increasingly being targeted by overseas crime syndicates posing as solicitors and offering huge sums of money from legacies, bequests or even the funds of deposed political leaders. Although largely West African in origin, these approaches have come from as far apart as South Africa and Holland.

Getting the money is invariably conditional on the charity sending these "solicitors" its details, letterhead and/ or a range of "advanced fees". None of these approaches have ended in money being handed over to the charity and many have found that sending details results in money being taken from the charity's bank account. Even sending a letterhead could be asking for trouble.

Our advice to charities is not to respond and to refer such approaches to the West African Organized Crime Section at NCIS (National Criminal Intelligence Service) at PO Box 8000, London SE11 5EN or via e-mail at: westafrican@spring39.demon.co.uk. Further information on NCIS can be found at www.ncis.gov.uk "

In the past, business-persons in India have been approached by similar groups from Nigeria, promising large business deals. It is possible that NGOs in India will be their next target.

22: Fellowship of the Ring…

(19-Jun-01)

If you are receiving fellowship, scholarship or stipend (exceeding Rs.36,000 p.a.) from a foreign source, you must file form FC-5 with Ministry of Home Affairs.

Many fellowships offered by Indian NGOs are ultimately funded by foreign sources. Form FC-5 should be filed in such cases also.

[This does not apply if you have only received a set of Tolkien from a foreign source. - Ed.]

23: FC Funds from CAPART?

(21-Jun-01)

Can a grant from CAPART be FC fund? The answer seems to be 'Yes'.

CAPART is an autonomous body registered under the Societies Registration Act 1860. It is functioning under the aegis of the Ministry of Rural Areas and Employment, Government of India.

CAPART is also registered under FCRA. Some of its funds come from foreign sources such as DANIDA. These funds are passed on to NGOs also (see http://capart.nic.in/vscapart/function.htm#INTERNATIONAL).

Therefore, it is possible that a CAPART grant to you may have come from CAPART's FCRA account. If so, you must deposit this in your FCRA bank account and report it in FC-3 in the second or subsequent recipient column.

[The above is a general statement. Please confirm the source of your grant with CAPART before taking any decision on this. (e-mail: capart@caparthq.delhi.nic.in)

23A: Revenue Stamp - limit

(25-Jun-01)

A revenue stamp is required only for transactions exceeding Rs.500. No stamp is needed if the amount is Rs.500.

Stamp duty is levied under the Indian Stamp Act, 1899. For more information on this, see AccountAble 34 at www.AccountAid.net.

24: Revenue Stamp and donations

(26-Jun-01)

Revenue stamp is not needed on receipts for donation. These are payments without consideration. [Exemption b. Article 53, schedule I of the Indian Stamp Act, 1899.]

Apparently, this exemption does not apply to grants from donor agencies.

25: Revenue Stamp on office advances

(28-Jun-01)

Revenue stamp is not required when you give advance to a staff member for office expenses. Similarly, no revenue stamp is required when you receive a refund from such advance. These are payments without consideration.

[Exemption b. Article 53, schedule I of the Indian Stamp Act, 1899. In re Burn & Co. 37 Cal. 346]

26: The First Accounting Manual

(29-Jun-01)

Kautilya's Arthashastra (~300 BC) is the world's first known systematic treatment of accounting concepts, including modern ones, such as changing prices, distinction between work in process, finished goods, raw materials, as well as current and deferred revenues.

[Kautilya, also known as Vishnugupt Chanakya, was the Prime Minister during Chandragupta Maurya's reign. – Ed.]