Income tax can be a pain, but failing to file can jeopardize your NGO's very existence. Filing income tax returns ensures transparency, accountability, and compliance with strict legal obligations.
Core Tax Rules for Non-Profits
Mandatory ITR-7 Filing
Even if an NGO’s income is fully exempt, filing an Income Tax Return in form ITR-7 is absolutely compulsory to remain compliant and active.
85% Utilization Rule
At least 85% of the total income generated in a financial year must be utilized strictly for charitable purposes to retain tax exemption benefits.
Audit Requirement
If annual income exceeds the basic exemption limit before applying provisions of sections 11 and 12, the NGO must get its accounts audited and submit Form 10B.
Consequences of Failure
Failure to file returns or misuse of funds leads to heavy penalties, retroactive taxation, cancellation of exemptions, and loss of NGO status.
Required Documents for ITR Filing
- 1
Financial Statements
Income & Expenditure Statement and Balance Sheet of the previous financial year to accurately reflect financial performance and position.
- 2
PAN and TAN Details
PAN and TAN cards of the NGO are strictly required for tax identification and statutory tax deduction filings.
- 3
Audit Report (If Applicable)
Mandatory if income exceeds the prescribed limit. A CA must audit the books to ensure transparency and compliance with tax laws.
- 4
Trust Deed / Registration Certificate
The foundational legal document establishing the NGO’s objectives, governing structure, and non-profit clauses.
- 5
Bank Statements
Previous year bank statements to verify all incoming donations, grants, and outward fund utilization.