35AC Registration - A fundraising tool for NGOs

Section 35 AC of the Income Tax Act, 1961, is one of the key provision which is relevant for
raising funds and resources for NGOs if understood and used effectively.
The objective of Section 35 AC is to encourage business organizations to contribute more in
social and economic welfare and upliftment of general public. With the increased emphasis on
the corporate social responsibility in the corporate sector and ostentatious display of charity by
people like Bill Gates and Warren Buffet, the contribution in the monetary term by the corporate
sector in India towards socially relevant project cannot be undermined.
NGOs involved in eligible projects notified by the Central Government for promoting the social
and economic welfare can raise resources for eligible project from corporate sector and fulfil
their objective of development.
Corporates simultaneously can fulfil their corporate social responsibility aspect of the business
by contributing towards the eligible projects and gain by availing deduction under Section 35
AC. Thus Section 35 AC can be used as an effective tool of fund raising by the NGOs. It can
also lead to a mutually beneficial relationship between NGOs and the Corporate Sector.
SECTION 35AC
Section 35 AC provides that where a person or company incurs any expenditure by way of
payments of any sum to :
A public sector company or;
A local authority or;
To an association or institution approved by the National Committee
For carrying out any eligible project or scheme for promoting the social and economic welfare of
the public as the Central Government may specify, then the amount so paid shall be allowed as
deduction from the business income of the assessee/contributor of such amount. In view of

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NGOs, the approved association or institution by National Committee can raise funds for their
approved from the eligible persons and donors can avail the benefits of tax deductions
Eligible persons to make contributions
Persons eligible to make contributions include:
An individual;
A Hindu Undivided Family;
A Company;
A Firm;
An Association of persons or Body of Individuals, whether incorporated or not;
A Local authority;
Every artificial juridical person not falling within any of the preceding sub-clauses.
The Section 35AC of the Income Tax Act, 1961 allows deduction from the income of the
assessee on payments made to eligible organizations and the donors will get this benefit. To
avail deduction under Section 35AC, all assessee other than companies should make payment
to outside agencies only, whereas companies have the option of either making payment to
outside agencies or they can incur expenditure themselves.
Procedure for making an application for approval of a project or scheme by the National
Committee:
In case an applicant wishes to include a project or scheme for promoting the social and
economic welfare of public or uplift of the public as Eligible Project or Scheme, then an
application has to be made to National Committee which should contain the following particulars
and be accompanied with relevant documents:
Title of project or scheme, date of commencement, duration and likely date of
completion;
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 Estimated cost of project or scheme duly supported by a copy of the resolution of the
Managing Committee of the applicant;
Classes of persons who are likely to be benefited from the project or scheme;
Affirmation that no benefit from the project or scheme, other than remuneration or
honorarium for whole time or part-time work done or for reimbursement of actual
expenses related to the project will accrue to the persons managing the affairs of the
association or institution
The eligible projects include:
i.

Family Welfare and immunization

ii.

Tree plantation

iii.

Social Forestry

iv.

Development of Irrigation Resources

v.

Rural Sanitation - Construction of low cost latrines

vi.

Medical camps in rural areas

vii.

Rural Health Programs

viii.

Land development and recovering of waste land with special concern on ecological
improvement

ix.

Soil and water conservation including harvesting of run off water

x.

Non formal education and literacy, especially for children and women

xi.

Rural and non farm activities.

xii.

Creation of employment opportunities for urban and rural population living below the
poverty line.
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xiii.

Supportive services for women to engage in productive work (Children care of working
women)

xiv.

Leprosy eradication

xv.

Promotion of sports

xvi.

Construction of dwelling units for the economically weaker sections

xvii.

Construction of school building for children belonging to the economically weaker

sections of the society

xviii.

Establishment and running of non-conventional and renewable sources of energy

systems
Any other program for uplift of the rural poor or the urban slum dwellers.

Working structure for approval of 35 AC registration

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Documents requisite:
a. Bye Laws of NGO
b. Copy of Registration Certificate;
c. Copy of resolution with date & seal of the NGO, passed by the Board to
undertake the work under S.35 AC of the IT Act;
d. A brief note on Proposed Project;
e. Brief note on past activities & credentials of Management with details of
experience in activities similar to the object of proposed project;
f.

Information regarding availability of land/infrastructure to execute the project

/land documents to be enclosed;

g. Expenditure incurred as on date on the proposed project;

h. Blue prints along with professional cost estimates in support of construction
activities;
i.

Income criteria for selection of beneficiaries/services to poor/weaker section of

the society;

j.

Information regarding recognition of school/training etc. from the concerned

education/technical board;

k. Details

of

similar

activities

undertaken

by

NGO

accomplishments/achievements etc.;
l.

Annual Reports & Audited Balance Sheets for last 3 financial years;

m. Activity Reports of last 3 years;

n. Approval under Section 12 A & 80G of IT Act;
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&

the

o. Approval under FCRA, if any

Disclaimer
Our article is based on the laws of India as on date. The laws and Rules mentioned herein are
subject to changes from time to time and any such changes may affect the article. We have no
responsibility to update our note for events and circumstances occurring after the date of this
memorandum, unless specifically requested for.

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