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In order to qualify for tax-exemption under the Income Tax Act, 1961, an NGO must be organized for religious or charitable purposes. Charitable purposes include "relief of the poor, education, medical relief and the advancement of any other object of general public utility."Public charitable trust must be created for the benefit of the public. Societies should be registered for charitable purposes. Section 25 companies are formed for the limited purposes of promoting commerce, art, science, religion, charity or any other useful object. Under the law ,the following conditions need to be fulfilled by any NGO in order to get exemption:The organization must be organized for religious or charitable purposes 85% of its income in any financial year (April 1st to March 31st)must be spent on the objects of the organization. The funds of the organization must be deposited as specified in section 11(5) of the Income Tax Act. No part of the income or property of the organization may be used for the benefit of the founder, trustee, relative of the founder or trustee or a person who has contributed in excess of Rs. 50,000 to the organization in a financial year.The organization must timely file its annual income return. The income must be applied or accumulated in India. However, trust income may be applied outside India to promote international causes in which India has an interest, without being subject to income tax. A not-for-profit organization is not taxed on income from a business that it operates for the attainment of the objects of the not-for-profit organization, provided they maintains separate books and accounts with respect to the business. Furthermore, certain activities resulting in profit, such as renting out auditoriums, are not treated as income from a business.The following groups are ineligible for tax exemption: all private religious trusts, and charitable trusts or organizations created after April 1, 1962, and established for the benefit of any particular religious community or caste. But a trust or organization established for the benefit of Scheduled Castes, backward classes, Scheduled Tribes or women and children is exempted. Law provides the types of donations that are tax-deductible. The Act permits donors to deduct contributions to trusts, societies and section 25 companies. Many institutions listed are government-related, donors are entitled to a 100% deduction for donations to some of these government funds. Donors are generally entitled to a 50% deduction for donations to non-governmental charities. Total deductions taken may not exceed 10% of the donor total gross income. Not-for-profit organizations involved in relief work and in the distribution of relief supplies to the needy are 100% exempt from customs duty on the import of items such as food, medicine, clothes etc.
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