Moneylife Events
NGOs must understand their legal obligations to stay out of trouble: Noshir Dadrawala

The chief executive of the Centre for Advancement of Philanthropy, who was addressing a Moneylife Foundation workshop, explained what is required from NGOs under the law and that is was critical to have a vision, a working plan and a reliable system to be effective

"A lot of people ask what are they required to do as NGOs or its trustees. Take a look at your charter first, and then, look at the government guidelines," said Noshir Dadrawala, chief executive of Centre for Advancement of Philanthropy. He was speaking at a seminar on 'Good Governance and Legal Compliance Issues for NGOs', hosted by Moneylife Foundation.

Mr Dadrawala discussed in detail the laws, regulations and definitions laid down for NGOs, saying was essential to know this to understand the legal obligations. "Whether you like it or not, there are several rules you have to abide by and it is a must that you follow them in order to avoid trouble."

While charitable institutions help people in many ways, they are often accused of bad management and dismal accounting. Mr Dadrawala explained how NGOs can manage their affairs better and what rules they must adhere to, so they are not de-legitimised and can function efficiently.

He gave a brief overview of the required form of a charitable organisation, the implications of the pending Direct Tax Code, the ambiguities present in relevant laws and the problems the voluntary sector faces. Mr Dadrawala emphasised how audits are to be filed, what records have to be kept and what notifications must be made to ensure legal and financial compliance.

Governance deficit is about authorities not fulfilling what is expected of them. Non-government organisations are increasingly filling in this gap in various areas of our lives. But, to be more effective, NGOs must have a vision, a working plan and a reliable system to implement the plan, he explained. Otherwise, they could be hampered in achieving their goals.

Mr Dadrawala discussed guidelines for voluntary organisations in the light of his experience as chief executive of The Centre for Advancement of Philanthropy, an NGO that specialises in charity laws and good governance. "Non-profit does not mean you must not make profit, but it means that the profits should not be distributed among the members of the charitable institution or the trustees," he said.

Mr Dadrawala talked about the rules that pertain to the income and expenditure of NGOs, and financial transactions between NGOs. His tip to NGOs is, "Have a detailed vouching system and a cash and receipt system in place, maintain records and go for audits regularly." He also elaborated on the restrictions placed on receiving foreign donations and ways to avoid them.

He also dwelt on the tax exemption rules pertaining to NGOs and donors. "One cannot be exempt from taxes simply by being a charitable institution. Unless NGOs fulfil certain criteria that the Income-Tax Act specifies, they are not exempt from taxes," he explained.

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COMMENTS

N Dey

6 years ago

Thank you for posting this article which does not really serve the "native" (i.e., the "domestic", the home-grown) NGOs (as compared to the "multi-national huge NGOs operating in India with huge fund-flows from abroad and with mind-boggling high voltage networking in the GOI for raising funds and drawing govt. funds through highly paid and qualified MBAs!). There are hundreds of charitable societies operating in the remotest corners of the country without any presence of the government machinery at all and without any access to donations or govt. funds (available only on "sharing" basis-i.e., bribes) or even without the possibility of collecting enough funds to bribe the income tax depatt. officers to obtain the minimum advantage/beneffit of sec. 80G. [The going rate in small places is Rs. 25000 to 50000 and, in metros, it is never below Rs. 5-10 lakhs and even several times more.] It would be necessary for some knowledgeable person to rather advise the small NGOs rendering yeomen's service to the below-BPL people in tiny places in the remotest hamlets in the most difficult terrains of the country (where the ruling elite and the rich and poweful truly do not know how the common and lesser people live!) as to the ways to seek help from/under various schemes of the Govt. It is shocking that the Govt. has repealed section 35CCA from the Income Tax Act denying the domestic social charities the benefoit of seeking donations from the public. Even the existence of sec. 35AC is not made public and, if at all any application is ever made under this section of the IT Act, the approval "costs" huge money and takes too long a time since the top bureaucrats comprising the high-powered Committeee do not find time in years to meet and take up the applications for disposal. And, even after years, if the Secretaries drawing fat salaries and enjoying huge perks do meet, tey spend half an hour to postpone the decisions. Let the poor people die or starve or lie without drinking water or rural education/health dwindle! This is the true picture of a transparent and resonsive bureaucracy which ensures the constiturion of a Central Pay Commission every five years to seee that their incomes and benefits increase (in addition to the incomes from sources like CWG, 2G, and the like).
May I request you to invite articles for the domestic, ordinary NGOs' information and knowledge about the wys to get IT benefits without bribes and also Govt. funds under umpteen number of schemes-also without paying bribes to the top to bottom? Also, will you also highlight thr restrictive orovisios proposed by the anti-people bureaucracy in the FCNR rules which are absolutely against the small, fund-starved domestic NGOs in comparison with the foreign-funded NGOs with international network?

REPLY

sucheta dalal

In Reply to N Dey 6 years ago

This is a report on a workshop we held at Moneylife Foundation. We are just 14 months old and do not fit into the rich NGO category that you mention. In fact, I doubt any of the 55 odd NGOs who attended Noshir's session fit your description.
Maybe it would be a good idea for you to attend such a seminar the next time. All of us found it useful and plan more such education sessions.
Sucheta Dalal

N Dey

In Reply to sucheta dalal 6 years ago

I am sorry, my comments were taken amiss whereas my intention was certainly not to belittle the deep inroads made by Moneylife Foundation into the minds of ordinary browsers like me. With due respects to Sucheta Dalal, a luminary in her own field, I wanted to highlight the plight of the very ordinary "desi" NGOs which are really being harassed for nothing by the authorities administering the FCRA (by mistake mentioned as FCNR by me), Income Tax Act (for the benefits under sections 80G, 35AC, etc.). Most of these NGOs keep paying money out of their meagre means through fixed middlemen indicated by the authoruty concerned and end up getting nothing. Most of the cases stand rejected unilaterally, without ant opportunity to them to try to present their cases before these corrupt officers (who, in any case, are interested only in bribes) and the National Committee (for 35AC) the members of which are too big to meet regularly-even for years-and guillotine the applications without any application of their own minds - unless, of course, the applications are weighty enough with the recommendations of lobbies/ministers. In this scenarioo, even knowledge of laws is really not enough.

I am grateful to Sucheta Dalal for her comments and I do hope I have been able to clarify my purpose in highlighting the woes of the small NGOs with no weighty person on their committtees and struggling for funds. I shall be happy, if some seminar is organised to discuss these issues too.

I regret, due to my location and logistics, it is not possible to travel to Mumbai and attend the seminars. The loss is entirely mine.

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