Gemini said The ITAT Mumbai ruled that Section 12AB registration cannot be denied merely because commercial receipts exceed the 20% threshold under Section 2(15) without assessing their nexus to charitable objects. The Tribunal remanded the case, noting that the Commissioner must first determine if the activities fall under specific charitable limbs or general public utility, and whether such receipts are incidental to the main charitable activities.

The Bombay High Court ruled that missing irrevocability or dissolution clauses in a trust deed are not valid grounds to deny registration under Section 12AB, as public charitable trusts are inherently irrevocable under the MPT Act. Consequently, the court overturned prior rejections and ordered tax authorities to update the online Form 10AB utility to prevent penalizing applicants for technical or procedural limitations.

Many NGOs mistakenly record restricted grants as income when they are actually liabilities. For example, if an NGO receives ₹50 lakhs for a project, it must consider the specific conditions of the grant. Under accrual-based accounting, income is recognized only when earned, meaning funds should only be counted as income as the organization fulfills its obligations. Incorrect treatment inflates surplus, weakens credibility, and misleads boards. Accountants should understand de

The ITAT Bangalore upheld the Kurunji Education Trust's appeal against the rejection of its permanent Section 80G approval by the Commissioner of Income Tax (Exemptions). The Tribunal found the rejection unjustified, emphasizing that concerns over surplus income and fee receipts should not affect approval. The focus should have been on the genuineness of the trust’s activities and compliance with Section 80G(5). Issues regarding fund application are for assessment proceedings

In the ITAT case of Hriday v. ITO, the Tribunal ruled that a sub-grant paid to the University of Texas from a project-specific grant received from NIH for a tobacco cessation research project does not constitute application of income outside India. The remittance was for collaborative purposes and was deemed a diversion of income by overriding title, thereby allowing the organization to maintain its tax exemptions under sections 11 and 12. The Tribunal found no benefits to sp

Cash vs Accrual Accounting is crucial for NGOs as it influences compliance and transparency with donors and regulators. Cash accounting records transactions when cash is received or paid, focusing on current liquidity, while accrual accounting records income when earned and expenses when incurred, offering a more accurate financial picture. Nonprofits face varying legal requirements, such as mandatory accrual accounting under the Companies Act and flexibility under the laws f

Grant accounting is essential for NGOs, focusing on managing donor funds through structured processes that ensure compliance. Unlike traditional accounting, it rigorously checks if funds were used as intended and reported accurately. Key steps entail setting up grants as cost centres, tracking budgets, and generating donor reports. This practice strengthens relationships with donors, enhances decision-making, reduces compliance risks, and improves funding opportunities. NGO f

The ITAT clarified that under section 12AB, cancellation of a charitable trust's registration requires proof of non-genuine or non-charitable activities. In the case of Raya Naik Memorial Gowshala Trust, the ITAT found insufficient evidence to support the Commissioner's claims, restoring the trust's registration and emphasizing that registration proceedings differ from assessment procedures.

In the case of ITO (Exemptions) v. Indian Rugby Football Union, the ITAT upheld the Commissioner’s decision to allow a salary of ₹46.50 lakhs to Mr. Naseer Hussain, emphasizing his extensive experience and responsibilities. The Tribunal noted that past appeals did not contest similar disallowances, affirming that the remuneration was justified and not excessive. Consequently, it ruled that the exemption under section 11 should not be denied, dismissing the Revenue's appeal.

The ITAT Delhi ruled that a trade promotion body, the Federation of European Business in India, cannot be denied registration under Section 12A of the Income-tax Act as its activities promote general public utility. The organization, a non-profit under the Companies Act, aimed to enhance trade relations between the EU and Indian authorities, which the Tribunal recognized as charitable activities. The Commissioner of Income-tax (Exemptions) had previously rejected its applicat

In the case of Salwan Education Trust v. Deputy Commissioner of Income-tax (Exemptions), the ITAT Delhi addressed the appeal concerning the trust's expenditures for the assessment year 2018-19. The trust, registered under section 12A of the Income-tax Act, was dedicated solely to educational activities and had accumulated funds for constructing school buildings. However, the Assessing Officer deemed that expenditures on schools not specified in Form No. 10 were a diversion of

The final post in Aria's NGO Finance Series emphasizes the vital role of the CFO in non-profit organizations, drawing on insights from working with over 400 NGOs. The CFO is portrayed as a strategic navigator who goes beyond mere financial oversight, enhancing decision-making, managing risk, and fostering donor and board confidence while ensuring long-term sustainability. The article distinguishes the roles of the CFO and the Head of Finance, highlighting that while the Head

The Income-tax Act, 2025 introduces major changes impacting revenue-generating activities of NGOs and charitable institutions. Breach of commercial receipt thresholds can now lead to cancellation of tax registration, while the expanded definition of “commercial activity” applies equally to GPU and per se charities such as education and healthcare. These developments significantly increase compliance risks, making it essential for NGOs to reassess pricing models, surplus gener

In the case of NSEFI v. Income Tax Officer, the ITAT ruled that voluntary contributions made to the society for promoting solar energy were not membership fees or commercial receipts, thus exempt under sections 11 and 12. The Tribunal noted varied donation amounts, lack of service in return, and prior acceptance of similar receipts by revenue. Consequently, the exemption was upheld, reversing the AO’s decision and granting full relief to the assessee.

The ITAT ruled in Dudhsagar Research and Dement Association's case that compulsory levies from milk societies were not corpus donations but taxable revenue income. The Tribunal reaffirmed prior decisions, stating these contributions lacked donor discretion. Despite this, the Trust qualifies for a 15% statutory deduction on revenue receipts under sections 11 and 12, leading to partial allowance of appeals.

The Head of Finance plays a critical role in the financial function of NGOs, ensuring daily operations run smoothly and efficiently. While the CFO is the strategist and storyteller, the Head of Finance is the process champion, responsible for aligning legal compliance, accounts, and finance operations. They oversee timely and accurate financial operations, compliance with complex regulations, and the structure, accuracy, and closure discipline of accounts. Additionally, they

ITAT Chennai denied registration to Agastya Gurukulam Public Charitable Trust under Section 12AB, citing lack of formal education and recognized curriculum. The Tribunal upheld the Commissioner’s finding that the trust's activities did not meet the criteria for advancing education or relieving the poor as defined in the Income-tax Act.

The ITAT ruled that payments made by the assessee, a registered educational society, to the Institute of Chartered Shipbrokers in London for books and fees were valid applications of income in India, as all benefits were utilized exclusively for Indian students.

Effective finance operations in the non-profit sector ensure smooth program execution, timely decisions, and donor trust. Key roles include CFO, Head of Finance, and operational pillars. Systematized finance operations improve accountability, reporting, and efficiency, helping NGOs better track funds, comply with budgets, and strengthen decision-making through collaboration and dedicated staff investment.

Aria CFO Services has worked with over 400 NGOs over the past 15 years, focusing on financial management for non-profits. They emphasize the importance of accountability, trust, and compliance in financial statements. They emphasize the need for clear accounting systems and capacity building to generate reports that inspire confidence among donors and stakeholders.