The term non-governmental organisations if it is used in its ordinary terms mean all organisations that are not owned by the government. However, NGOs as we all know are organisations set up to provide services of different nature to the public or targeted group for free or at a highly subsidised rate. By their charter and certificate of registration, they are not profit-seeking.
The third schedule 74) item 12 to the personal income tax act 1993 as amended “exempts the income of any ecclesiastical, charitable or educational institution of a public character from taxation provided the income is not derived from a trade or business carried on by such institution”. The import of this provision is that the income of NGOs from donations, grants and support services are not taxable.
Where NGO’s funds are used to acquire assets i.e. motor vehicles, landed property etc. in a name different from that of the organisation or in the name of an individual who is associated with the organisation, funds so expended become income in the hand of the entity/individual and as such taxable.Pay as You Earn : The law exempts NGOs as an entity from paying taxes on non-profit related income as explained above. Employees of NGOs are not exempted from payment of personal income tax.
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