Tax & Regulatory Compliance

• ITR-7 (Annual Return): Mandatory for all 12A NGOs regardless of income level — by 31st October each year
• Form 10B (Audit Report): CA audit report mandatory if total income exceeds Rs.2.5 lakhs — must be filed before ITR-7
• TAN Registration: Required if NGO pays salaries, professional fees, rent, or contractor payments above threshold limits
• TDS on Salaries (Section 192): Deduct TDS on employee salaries above basic exemption limit
• TDS on Professional Fees (Section 194J): 10% TDS on payments to consultants, lawyers, CAs above Rs.30,000 per year
• TDS on Rent (Section 194I): 10% TDS on rent above Rs.2,40,000 per year
• TDS on Contractors (Section 194C): 2% TDS on contractor payments above Rs.30,000 per payment / Rs.1,00,000 annually
• Quarterly TDS Returns: Form 24Q (salary TDS) and Form 26Q (other TDS) filed quarterly
• Form 16 / 16A: Annual TDS certificates issued to employees and vendors

• Pure Charitable Activities: Services provided free of charge for charitable purposes are generally exempt from GST
• Fee-Based Services: If an NGO charges fees for educational, training, or other services, GST registration may be required if turnover exceeds Rs.20 lakhs (Rs.10 lakhs in special category states)
• FCRA Receipts: Foreign contributions received under FCRA are not "supply" under GST — not subject to GST
• CSR Funds Received: Not subject to GST if used for charitable purposes without any specific service being rendered to the corporate donor
• Rent Income: If NGO receives rent from property, GST applies if rental income exceeds Rs.20 lakhs
• Professional Tax: State-specific professional tax registration required for NGOs with employees in applicable states

• Section 11(1)(a): Income applied for charitable purposes during the year — 100% exempt
• Section 11(1)(b): Income accumulated / set apart (up to 15% of gross income) — exempt
• Section 11(2): Specific accumulation for identified projects — exempt if Form 10 filed before due date of ITR
• Section 12: Voluntary contributions treated as income from property held for charitable purposes
• Section 80G Corpus Donations: Donations specifically made to corpus fund — not treated as income

Q: Can an NGO receive salary income from consulting work and still maintain 12A exemption?
An NGO can earn income from activities incidental to its charitable objects. However, business income that is not incidental to the charitable purpose is taxable even with 12A registration. The key test is whether the income-generating activity is substantially related to the NGO's stated charitable objects.

Q: What happens if TDS is not deducted by an NGO?
If an NGO that is required to deduct TDS fails to do so, it becomes a "defaulter in deduction" under the Income Tax Act. The TDS amount becomes disallowable as expenditure, and a penalty equal to the TDS amount can be levied. The NGO could also face a disallowance of Section 11 exemption for that year if the failure is found during scrutiny.