Managing a non-profit or charitable organisation in India carries obligations not only to the government but also to society. Filing non-profit tax returns is one of the most crucial legal obligations.
Many believe non-profits, since they do not make profits, do not have to pay taxes. That’s untrue, though. You must report your income and expenses to the Income Tax Department even if your company is registered as a trust, society, or Section 8 company.
Let’s dissect all you need to know into basic terms.
Do Nonprofits Have Tax Obligations?
If they satisfy specific Income Tax Act requirements—mostly under Section 12A and 80G—nonprofits are usually free from paying income tax. To reap these advantages, though, the company needs to:
- Register under Section 12A.
- Use income just for philanthropy.
- Steer clear of rewarding any member or individual.
- File timely and correctly annual tax returns.
Ignoring these guidelines could result in the cancellation of the exemption, and regular taxes could be due.
Why Should One File Nonprofit Tax Returns?
Filing a return is not just a formality. With donors, it demonstrates openness and fosters confidence.
- Authorities
- Financial companies
It also helps the company to keep its tax-exempt status. Ignoring returns for even one year might cause loss of exemption under Section 12A and cause the income to be taxable.
With which ITR form should I apply?
Most non-profits have to submit ITR-7. Trusts find use in this form.
- Societies
- Section 7 businesses
- Universities, educational institutions, and hospitals asserting exemption under particular sections, including 10(23C), 11, 12A, etc.
The form requests specifics, including income received—donations, grants, etc.—as well as:
- Using money (charitable work expenses)
- Liabilities and assets
- Information about significant contributors, if relevant
Guidelines for submitting non-profit tax returns
- Register using your organization’s PAN on the Income Tax page.
- Get ready with accounts covering income, expenses, balance sheet, and donation specifics.
- Get the accounts checked; if income exceeds ₹2.5 lakh,
- Fill ITR-7 using offline or internet utilities.
- Upload the form and e-verify with DSC (Digital Signature Certificate).
To prevent errors, it is advisable to speak with a CA or professional conversant in NGO tax laws.
Key Deadlines
- Usually, the last date to file is October 31st of the assessment year.
- Should an audit not be necessary, July 31st is the due date.
Ignoring the deadline might cost fines and compromise the exempt status.
Final Thoughts
A non-profit has obligations to remain tax-compliant, even if it is not making a profit in the business sense. An essential component of managing a legal and reputable business is filing non-profit tax returns each year. It’s about preserving the credibility and trust every non-profit depends on, not only about obeying the law.