In a bid to tighten the noose around charitable institutions, hospitals, educational institutes etc who enjoy tax exemptions, the central board of direct taxes (CBDT) on 10th August notified fresh rules, mandating the institutions to maintain their records for atleast 10 years.
According to the notification, CBDT has brought in a comprehensive list of records to be maintained by charitable institutions to avail income tax exemption.
The new rules state that the record keeping requirements are applicable for – Funds, Institutions, Trusts, Universities, educational institutions, hospitals, medical institutions etc.
The aim behind such a move is to ensure that there is no abuse of exemptions claimed by these charitable institutions and other entities, who enjoy tax concessions.
Section 10 (23C) & 12(A) of IT Act, enables the tax department to extend tax exemption on the income, including voluntary contributions, that these institutions get.
The detailed list of documents to be maintained by these institutes includes - cash book, ledgers, copies of bills, documents supporting income used in India and abroad, record of properties held by assesse —both movable and immovable, transactions involving immovable properties, documents pertaining to projects undertaken, voluntary contributions received, loan taken, investment made, etc.
However, books of accounts and other documents can be kept in either written form or in electronic or digital form.
Though the move has not been much appreciated, as experts feel the genuine institutions might not have much means to maintain these records for compliance.
Former president of ICAI, Ved Jain said, “The list of books of accounts and documents required to be maintained for a period of 10 years from the end of relevant assessment year, which means 11 years from the end of relevant financial year, is comprehensive and too wide."
He further informed that, "the notification may be with a good objective for enforcing discipline and strict compliance on charitable trusts and institutions claiming tax exemption but the fact that many of these charitable trusts and institutions are small and don’t have the wherewithal to comply all these requirements shouldn’t have been ignored".
"We in India have a large number of NGO’s which are doing a great service to the society by providing relief to people in distress and reaching out to these people quickly in the hour of crisis even before the Government aids or relief coming up," he said.
Whether it may be earthquake in Bhuj, Sunami in Chennai or Covid lock down, it were these charitable trusts or institutions who rushed overnight to provide relief and it would have been next to impossible to provide the relief to the real needy people in distress ," he added.
He noted that, "most of these NGO’s are being run and managed by honorary/ retired/ senior citizens. These people spend there time , energy. These NGO’s don’t have the wherewithal and financial resources to comply such strict requirements as envisaged by the various provisions of Income Tax including now this new requirement of books of accounts and other documents".
"For complying these requirements these trusts will need services of professionals which many of them will find difficult to afford. As against this the many of so called charitable Medical/ Engineering Colleges / Hospitals are being run on corporate lines and have best of resources and access to best of professionals and enjoying tax exemption despite running on commercial lines".
"Now this notification treats both the NGO’s working for the cause of society and the so called charitable colleges and hospitals at par” he added.