Written by:
Anoushka Pinto
In the intricate web of social development, Non-Governmental Organizations (NGOs) play a pivotal role as catalysts for change, striving to address pressing societal issues ranging from poverty alleviation to environmental conservation. However, the journey of these NGOs is often fraught with financial challenges, hindering their ability to effectively execute their missions. Recognizing the critical role NGOs play in nation-building, the government has instituted various provisions and grants to support their operations.
In this article, we delve into the government provisions and grants that bolster the endeavors of NGOs in India, enabling them to amplify their impact and bring about meaningful change in society.
1. Section 12A Registration
Section 12A registration is essential for NGOs, trusts, and other charitable organizations seeking exemption from income tax payment. This registration, granted under the Income Tax Act of 1961, allows eligible entities to claim tax exemptions on income earned from grants, donations, and other forms of contributions.
To qualify for Section 12A registration, organizations must meet the following criteria:
- The entity must be established wholly for charitable or religious purposes, as defined under Section 2(15) of the Income Tax Act.
- The organization should engage in activities that fulfill its charitable objectives without aiming to generate profits for specific individuals or groups.
- The organization must be registered as a trust, society, or Section 8 company under the appropriate laws, with proof of constitution submitted as part of the application.
- Income and assets should be utilized solely for charitable or religious purposes, without benefitting specific individuals.
- Proper accounting records and relevant documents must be maintained to reflect income, expenses, and activities.
- Annual income tax returns must be filed in a timely manner, even if the organization is eligible for exemption, to maintain its tax-exempt status.
Engaging in political activities or supporting any political party or candidate can lead to cancellation of Section 12A registration.
Obtaining Section 12A registration offers several advantages to non-profit organizations, including:
- Income Tax Exemption: Income received by the organization is exempt from income tax, enabling more resources to be allocated toward charitable endeavors.
- Accumulation of Income: Registered entities can accumulate income for future use, subject to certain limits.
- Exclusion from Total Income: Accumulated income for charitable or non-commercial purposes is not included in the organization’s total income, reducing tax liability.
- Access to Grants: NGOs with Section 12A registration are eligible to receive grants from domestic and international sources, facilitating financial support for charitable activities.
- One-Time Registration: Section 12A registration is treated as a one-time registration, eliminating the need for periodic renewal.
- Flexible Benefits: Registered NGOs can avail themselves of registration benefits as needed, without rigid renewal processes, providing flexibility in utilizing benefits based on organizational needs.
The procedure for obtaining Section 12A registration involves the following steps:
- Submission of Application: NGOs must submit Form 10A online to the Commissioner of Income Tax, along with necessary documents.
- Request for Additional Information: The Commissioner may request additional information or documents to verify the authenticity of the organization’s activities.
- Approval and Written Order: If satisfied, the Commissioner issues a written order stating the organization’s eligibility for Section 12A registration.
Privilege of Registration: Upon receiving the written order, the organization can avail of the registration privilege under Section 12A.
In case of deficiencies, the Commissioner may reject the application, informing the organization of the reasons for rejection.
Essential documents required for Section 12A registration include:
- Instrument of trust or establishment document.
- Registration certificate issued by the applicable body.
- Evidence of objectives adoption or modification.
- Annual financial statements for the preceding three years.
- Detailed activities note describing the organization’s activities.
2. Section 80G Certification
Section 80G of the Income Tax Act facilitates tax deductions for individuals and organizations contributing to eligible charitable institutions. When an NGO obtains an 80G certification, it signals approval from the Income Tax Department, qualifying it to receive donations exempt from income tax.
The 80G Certificate incentivizes donors to contribute funds to NGOs by offering tax relief. Donors can claim a 50% tax exemption on their donated amount, provided they furnish a stamped receipt of their contribution.
To qualify for 80G registration, NGOs must adhere to specific eligibility criteria, including:
- Appropriate legal structure recognized by the Indian government.
- Non-profit nature with a primary focus on charitable activities.
- Compliance with income tax regulations and maintenance of proper accounting records.
- Prior registration under Section 12A, which provides tax exemptions to charitable institutions.
- Tax Deductions: Donors can claim deductions of up to 50% or 100% of their donated amount from their taxable income, depending on the classification of the charitable institution.
- Wider Reach: Registered NGOs gain credibility and transparency, making them more appealing to potential donors. This, in turn, expands the donor pool, enhancing fundraising efforts.
- Enhanced Credibility: 80G registration enhances the credibility and trustworthiness of charitable organizations, fostering increased donor confidence and support.
- Initiate the Application: NGOs must direct their 80G certificate application to the Commissioner of Income Tax (Exemption) within their jurisdiction.
- Compile Necessary Documents: Gather all required documents, including the incorporation document, registration certificate, FCRA registration (if applicable), existing approval orders, and annual accounts for up to three years preceding the application.
- Submit Application and Inspection: Submit the application along with the necessary documents to the designated authority. The Income Tax department may conduct a physical inspection of the NGO’s premises to verify compliance and authenticity.
- Provide Additional Details if Required: During the inspection, officials may request supplementary documents or evidence. NGOs should promptly provide these additional details to facilitate the application process.
- Certification: Following a thorough review and validation of the submitted documents, as well as the NGO’s premises, the Commissioner grants the institution with the coveted 80G certificate, enabling it to avail tax benefits and attract potential donors effectively.
The Finance Act 2020 introduced notable changes to the 80G registration process, including:
- Introduction of provisional registration valid for three years.
- Renewal requirements for both new and existing registrations.
- Mandatory revalidation of existing 80G approvals.
Essential documents for 80G registration include:
- Incorporation document and registration certificate.
- Registration under the Foreign Contribution Regulation Act (FCRA), if applicable.
- Existing order granting approval under clause (23C) of section 10.
- Annual accounts and audit reports for up to three years preceding the application.
3. FCRA Registration
The Foreign Contribution (Regulation) Act (FCRA) allows NGOs to receive foreign funding after obtaining registration or prior permission from the Ministry of Home Affairs, Government of India. It was enacted in 1976 to regulate foreign donations received by individuals and associations in India. It aims to ensure that organizations function in line with the values of a sovereign democratic republic.
- Eligible entities include Trusts, Societies, or Section 8 Companies with a minimum of three years of existence.
- Bank account for the receipt of foreign funds in the State Bank of India, Delhi
- NGOs seeking FCRA registration must demonstrate a minimum expenditure of Rs. 10,00,000 over the last 3 years on stated objectives, excluding administrative costs.
- Audited income and expenditure statements for the past 3 years are also required.
- Applications for FCRA registration are submitted online through the FCRA portal.
- Along with the application form FC-3, applicants must provide essential documents such as registration certificates, activity reports, and audited financial statements.
- Once granted, FCRA registration is valid for five years.
- NGOs must apply for renewal six months before the expiry date to keep the registration active.
- Failure to do so or the discovery of false statements may result in cancellation of the registration.
Read more about FCRA, here.
4. NGO Grants:
Various government departments and ministries offer grants and financial assistance to NGOs.
NGOs focused on promoting India’s rich cultural heritage and traditions can benefit from the Cultural Functions Grant provision (CFGS) under the Ministry of Cultural Affairs.
- This provision provides funding for organizing seminars, festivals, exhibitions, and other cultural events that celebrate and showcase India’s diverse culture.
- It also extends its assistance to cover the organization of festivals and exhibitions as well.
- Eligibility for this grant is open to all Not-for-Profit organizations, including University Departments/Centres.
- Previously capped at 75% of the project cost, the government assistance now has an increased ceiling of Rs. 5 lakhs.
- Applications for this provision can now be submitted throughout the year.
The National Cancer Control Programme, initiated by the Ministry of Health and Family Welfare, offers financial support to Voluntary Organisations through the Voluntary Organisations provision.
- This provision aims to provide assistance of up to Rs. 5 lakhs to NGOs engaged in health education and early detection activities related to cancer
- To qualify for this provision, NGOs must have a track record of at least three years in cancer control activities and must be recommended by the State Government.
- The eligibility criteria for NGOs applying under this provision are governed by the provisions outlined in GFR 148 to 151 – NGOs must be registered under the Societies Registration Act, 1860, and must operate as charitable organizations.
- NGOs seeking grant-in-aid under this provision must submit a detailed application as per the prescribed format. This application should include essential documents such as the Registration Certificate, Articles of Association, Bye-laws, Audited Statement of Accounts, and Annual Reports for the past three years.
- Additionally, NGOs must provide information regarding the source and pattern of their income and expenditure.
The Ministry of Women and Child Development administers a pivotal initiative known as the General Grant-in-Aid provision, also referred to as the provision for Innovative Projects for Women and Children. This initiative aims to support innovative voluntary endeavors and initiatives that provide essential services for women and children. The primary objective of the provision is to complement existing programs of the Ministry and the Central Social Welfare Board (CSWB), rather than duplicating them. Financial assistance is extended for services that are not covered by the structured provisions of the Ministry or CSWB.
Project Categories:
- Innovative Approaches: Projects proposing novel approaches to address pressing social issues are encouraged.
- Service Gap Fillers: Projects that fill crucial gaps in existing services and complement them to maximize impact are eligible for support.
- Urgent Need Areas: Projects targeting urgent problem areas that are relatively underserved are prioritized.
- Integrated Services: Projects offering integrated services, where various components may not be funded by a single source, are considered.
- Community-Based Initiatives: Projects that provide non-institutional services and are community-based are favored. However, institutional programs may also receive support when necessary.
Financial Assistance:
Financial assistance covers up to 90% of the approved costs for both recurring and non-recurring expenditures. The remaining 10% is expected to be covered by the voluntary agency or another organization. In cases where organizations are situated in remote, backward, or tribal areas, the government may cover up to 95% of the approved costs. The extent of financial assistance is determined on a case-by-case basis by the Project Sanctioning Committee under the auspices of the Secretary, Ministry of Women and Child Development.
The Assistance for the Prevention of Alcoholism and Substance (Drugs) Abuse program by the Ministry of Social Justice and Empowerment aims to identify, counsel, treat, and rehabilitate addicts through voluntary and eligible organizations.
- Under this provision, voluntary organizations and eligible agencies can receive financial assistance of up to 90% of the approved expenditure for various activities such as setting up and running Integrated Rehabilitation Centre for Addicts (IRCAs), Regional Resource and Training Centres (RRTCs), conducting Awareness-cum-De-addiction camps (ACDC), and implementing Workplace Prevention Programs, among others.
- In the North-Eastern States, Sikkim, and Jammu & Kashmir, the assistance provided can be up to 95% of the total admissible expenditure, with the remaining amount to be borne by the implementing agency.
NGOs focused on tribal development, including enhancing access to government provisions and services in tribal areas, can receive grant-in-aid from the Ministry of Tribal Affairs. The primary aim of this grant is to extend the reach of government welfare initiatives and bridge the service gaps in tribal areas lacking essential services such as education, healthcare, clean water, agricultural productivity, and social security. Additionally, innovative projects directly impacting the socio-economic development and livelihood generation of STs may also be considered through voluntary efforts.
Eligible organizations for assistance under this provision include:
- Registered voluntary organizations (VOs) or non-governmental organizations (NGOs) actively involved in promoting the social welfare of STs. These organizations must have been registered for a minimum of three years.
- Institutions or organizations established by the government as autonomous bodies, either through a statute or registered as societies under the Societies Registration Act, 1860.
- Public trusts registered under prevailing laws, with a registration tenure of at least three years.
In addition to the above criteria, the selection of NGOs will also consider the following factors:
- A minimum of three years of experience in the relevant field.
- Demonstrated aptitude and experience in welfare activities targeting marginalized sections of society.
- Project location in service-deficient tribal areas. Priority will be given to programs benefiting Primitive Tribal Groups or areas affected by naxalism, remote, interior, or backward regions underserved by government institutions or established NGOs.
- Financial sustainability of the organization to contribute its share and ability to sustain activities for limited periods without assistance from the Ministry.
- Strong reputation and credentials in the field.
- Capacity to mobilize communities and effectively network with other institutions for the optimal utilization of allocated resources and assets created.
Find the complete directory of government-sponsored provisions, grants and funding for NGOs, here.
5. CSR Funding
Corporate Social Responsibility or CSR, refers to the commitment of businesses to contribute positively to society and the environment in which they operate. CSR activities can include initiatives related to education, healthcare, environmental sustainability, poverty alleviation, and community development. NGOs can partner with such companies to receive funding for their projects.
CSR in India is regulated by Section 135 of the Companies Act, 2013, along with Schedule VII and the Companies (CSR Policy) Rules, 2014, which requires certain companies to spend a portion of their profits on CSR activities. These activities are aimed at benefiting society and promoting sustainable development while ensuring responsible corporate behavior.
NGOs must meet specific criteria to receive CSR funds:
- Registered as a section 8 company, a registered public trust, or a registered society under sections 12A and 80G of the Income Tax Act
- Minimum of three years of charitable activities.
- NGOs are required to register with the central government by electronically submitting Form CSR-1 to the Registrar.
- This form will undergo digital verification by either a practicing Chartered Accountant, Company Secretary, or Cost Accountant.
- Upon submission of Form CSR-1 on the portal, the system will automatically generate a unique CSR Registration Number.
- Documents required:
- A copy of the registration certificate.
- A copy of the NGO’s PAN card along with Form CSR-1.
- DIN/PAN of the organization’s Director, Trustee, Secretary, etc.
- A copy of the Resolution, indicating the authorizing person by the entity, with the Resolution number and date.
- The DSC of the individual.
CSR mandates that companies with a net worth of Rs. 500 Crores or more, or a turnover of Rs. 1000 Crores or more, or a net profit of Rs. 5 Crores or more, allocate at least 2% of their average net profits for CSR activities.
As pillars of social progress, NGOs are instrumental in driving positive change and fostering inclusive growth across communities. However, their endeavors are often constrained by financial limitations. Government-sponsored provisions and grants serve as lifelines, empowering NGOs to overcome these challenges and continue their noble pursuits unhindered. By nurturing partnerships between governments and civil society, these initiatives create a synergistic ecosystem where collective efforts converge to tackle pressing societal issues.
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