AccountAid Capsules 2001 (1-58)

In USA, all tax-exempt NGOs have to file form 990 with the Internal Revenue Service. This form is open to public for inspection and must be provided on request.

The form includes extensive information on income, expenditure, assets, and liabilities as also remuneration of five top officers and five top consultants.

The US law allows the NGOs to make the form available on its web site instead of mailing to each person who asks for it.

Quite sensible: World Vision's latest form 990 runs into 69 pages! And this, when USA has a law called Paperwork Reduction Act, 1995!

2: Trust regulation in India

(5-May-01)

Unlike Societies, there is no law governing public charitable trusts in India. They are governed by civil law. Indian Trusts Act, 1882 applies only to private trusts.

Public trusts are formed by simply registering the trust deed with a court registrar. They also register under Income Tax Act to get tax exemption.

However, trusts in Maharashtra and Gujarat are governed by Bombay Public Trusts Act, 1950.

3: Regulation of Charities in UK

(6-May-01)

All charities in UK must register with the Charity Commission for England and Wales. They must also file an annual return and accounts. Copies of the accounts can be obtained by public. The Commission also has supervisory and investigative powers. The Commission's register of charities is open to public and can be searched through the internet (http://www.charity-commission.gov.uk/).

Some charities are exempt from registration. These include friendly societies, industrial / provident societies, and charities with annual income less than 1000 British pounds (~ Rupees 70,000).

4: The Number System

(8-May-01)

The Western numerals (1,2,3, ...0) used throughout the world today originated in India. From here, these passed to the world through Arab scholars. These are, therefore, known as Arabic or Hindu-Arabic numerals. The Arabs themselves called these as Hindu figures (Al-Arquan-Al-Hindu). There are also visual similarities between the current Devangari (Indian) symbols and the Western (English) numerals.

The numerals for 1-9 were developed in India by 200 BC. The numeral for zero was developed around 500 AD. These traveled to Baghdad along with Arab merchants on the monsoon winds

(According to Ginsburg, a Hindu scholar named Kanka from Ujjain was invited to Baghdad for this purpose by Abbaside Khalif Al Mansur). From Baghdad, these spread to Europe, which was then using the cumbersome Roman numerals (III, IX, XXXIII, etc.).

[Sources: The Dawn of Indian Civilization, edited by G.C. Pande. 1999. Published by PHISPC; pp. 672-673.

IslamiCity.com http://islam.org/mosque/ihame/Ref6.htm

Ginsberg: ‘New Light on Our Numericals’ Bulletin of the American Mathematical Society, Vol.25, 1919, pp.366-9

Encyclopaedia ‘Britannica 2001’ Deluxe Edition CD Rom: Entry titled ‘Khwarizmi, al-‘]

5: Gratuity & NGOs

(9-May-01)

A small example of how things change. Gratuity originally meant a voluntary payment or a gift. It is now enforced by law! Thus, in India, all societies or Trusts with 10 employees or more come under Payment of Gratuity Act, 1972. This happened through a notification (S.O. 228 dated 20-Aug-1997) in 1997.

Further, they must take a policy from Life Insurance Corporation of India to cover this liability. Certain trusts (which have an approved gratuity fund) do not have to take the LIC policy.

(Incidentally, this law applies to profit-oriented sector as well.)

6: FCRA & Gujarat Earthquake

(11-May-01)

FCRA rules have been relaxed for Gujarat Earthquake relief. You can receive the money and then apply in form FC-1A. Approval will be almost automatic. Right?

Right. But only till 31st May 2001. The relaxation (see Gujarat_Earthquake_FCRA_ITax.htm), which was valid till 31st March 2001, has been extended to 31st May (MHA press release dated March 28, on their web-site).

7: FCRA and the Purpose of Registration

(17-May-01)

Indian NGOs registered under FCRA (Foreign Contribution Regulation Act, 1976) for social work cannot take up religious activities. Similarly, religious groups (missions, ashrams etc.) registered for religious work cannot take up social work.

So if you want to do both, then you must say tick both at the time of applying for FCRA registration.

8: Last date for filing Income Tax Return

(30-May-01)

Last date for filing the Income Tax Return by NGOs remains unchanged as 31st October. The proposed change (31st July) has been withdrawn by the Finance Minister.

However, this is valid only if the NGO's income exceeds Rs.50,000 and they are filing an audit report in form 10B. For other (smaller NGOs), the last date remains 31st July.

9: Build-up to FCRA amendment…

(31-May-01)

In October 2000, Mr. Vidyasagar Rao, Union Minister of State for Home Affairs said:

"... the Centre was firm that foreign funds were properly used considering that they would cross the Rs. 4,000 crore mark during 2000-01. It would be detrimental to national interests if the money was misused.

He asserted that the Centre had no proof of misuse of these funds by some organisations for religious conversions. But, 11 such recipients had issued advertisements denouncing the Vajpayee Government before the last Lok Sabha poll following which they were placed in the list of outfits, which required permission for receiving funds. The organisations subsequently apologized for having indulged in activities of political nature.

Mr. Rao said the amendment was also necessitated by the fact that several organisations were utilizing the funds, furnishing accounts much later and approaching his Ministry for condoning the delay."

[Source: The Hindu, 2-Oct-2000]

10: FCRA amendment round the corner?

(31-May-01)

Probably. The Centre is proposing to amend FCRA to make sure:

1. NGOs maintain proper accounts;

2. District Collectors or Deputy Commissioners can keep a watch over the NGOs;

3. FC funds are not used for political purposes;

This information comes from Mr. Vidyasagar Rao, Union Minister of State for Home Affairs (The Hindu, 30-May-2001). He had said this earlier also in October 2000 at Hyderabad (The Hindu, 2-Oct-2000)

11: Last date for filing FC-3

(1-Jun-01)

There has been no change in last date for filing FC-3. The last date remains unchanged as 31st July.

[FC-3 is the annual return for foreign contributions received by Indian NGOs.

Over the last couple of weeks, several NGOs have been asking whether last date for filing FC-3 has changed.

12: Foreigners on your campus?

(1-Jun-01)

Inform the local Police Station whenever you have a foreigner staying in your house, office or campus.

According to other press reports in The Times of India:

1. This is an old standing order. The Government plans to enforce it more strictly.

2. You have to report only if the foreigner stays with you for 24 hours or more. Rule covers house, office, campus, etc.

3. You can phone in the details to local Police Station.

[Source: MHA Press Release dated 8th May 2001, see below]

INTIMATION REGARDING PRESENCE OF FOREIGNERS

This is for the information of General Public that as per Foreigners (Report to Police) Order, 1971, made under the Foreigners Act, 1946 (31 of 1946), every householder or other person shall report to the Officer-in-charge of the nearest Police station about the arrival or presence in his household or in any premises occupied by him or under his control of any foreigners, if he knows or has reasons to believe that he is a foreigner.

Non-Compliance of this order would attract punitive action under the Foreigners Act, 1946 (31 of 1946) i.e. imprisonment upto a period of five years or with fine or with both.

13: FC Receipts in 99-00

(4-Jun-01)

In 99-00, FC Receipts came to Rs.3,810 crores.

This is higher than 98-99 (Rs.3,403 Crores) by 12%.

However, the rate of growth has come down: in 98-99, the receipts had grown by 18.8%.

[Source: Statement of Mr. Vidyasagar Rao, Union Minister of State for Home Affairs. Published in The Hindu, 30-May-2001]

14: Funding to BIMARU States

(5-Jun-01)

In 99-00, following FC Receipts were reported (in Rupees Crores):

Delhi 572; Tamil Nadu 554; Andhra 531; Karnataka 420; Kerala 366; and, Maharashtra 351.

What about the BIMARU states? We have information on two of these (Rupees crores):

Bihar 109; and, Uttar Pradesh 107.

While Bihar's inflow has risen by 9%, UP shows a drop of 20%.

[Source: Statement of Mr. Vidyasagar Rao, Union Minister of State for Home Affairs. Published in The Hindu, 30-May-2001]

A crore is equal to 10 million. A US Dollar fetches 47 Rupees). There are four BIMARU states: Bihar, Madhya Pradesh, Rajasthan, Uttar Pradesh. The acronym BIMARU sounds similar to the Hindi word 'bimar', which means ill or unwell. FC is short for foreign contribution. The above is a partial listing out of a total receipt of Rs.3,810 crores. FCRA state-wise classification is not very accurate as funds are passed on from Agencies in one state to NGOs in another.

15: Publishing your accounts

(8-Jun-01)

NGOs with receipts / income of Rs. 1 crore (10 million) or more should publish their accounts in a local newspaper. This applies from financial year 2001-02 onwards. If they don't do this, they will lose their income tax exemption.

This also applies to clubs, temples, churches, gurudwaras, traditional Trusts, universities, hospitals etc. -- in short, any non-profit organization which enjoys income tax exemption under section 12 or under clauses (iv), (v), (vi) or (via) of section 10(23C).

16. Fund-raising by Congress

(10-Jun-01)

Congress is planning to raise a corpus of Rs.50 crores through graded subscriptions from members, ticket-seekers, public and corporate houses.

It also plans to get funds from NRIs. However, FCRA does not allow this. Therefore, Congress is planning 'to set up a foundation to organize political education and training'. Funds from non-resident Indians will presumably be taken into the Foundation, after the Foundation gets FCRA clearance.

[Source: The Hindu, Delhi edition. June 10, 2001]

17. FC and non-FC

(12-Jun-01)

Indian citizens living abroad can send donations to Indian NGOs without attracting FCRA. There is no upper or lower limit on this.

However, foreigners (including former Indian citizens) living in India or abroad are on a different footing. They can not give funds / material to Indian NGOs who do not have FCRA registration or permission.

The type of currency (Rupees or dollars) does not matter in either case.

18. FCRA items below Rs.1000

(12-Jun-01)

Are items below Rs.1,000 in value exempt from FCRA?

No. These are exempt only when received as a gift for personal use. Personal gifts can be given to individuals, not to organizations.

19: 125% deduction from Income

(14-Jun-01)

Responding to the endless calls of 'Yeh Dil Mange More[1]' from fund-raisers and donors...

Under section[2] 35(1)(iii) you can offer 125% deduction from taxable income to your donors.
This extra benefit is available to donors who have business or professional income.
Other donors can claim 100% only under section 80GGA(2)(aa).
Organizations doing research in social sciences or doing statistical research are eligible for approval under section 35(1)(iii) by the CBDT.

For more information, see AccountAble 61.

20: National Committee for 35AC

(15-Jun-01)

A new committee has been notified for approving projects under section 35AC. The committee has a three-year tenure beginning 21st May 2001. Justice R.S. Pathak (former CJI) continues as Chairman.

Names of other members and additional information on 35AC is available in AccountAble 17. Follow the AccountAble link from www.AccountAid.net

[Indian NGOs approved under 35AC of the Income Tax Act, 1961 can offer 100% deduction from taxable income to their donors.]

21: Fraud Warning for Charities

(16-Jun-01)

The Charity Commission in UK has posted the following information on its web-site:"Charities in the UK are increasingly being targeted by overseas crime syndicates posing as solicitors and offering huge sums of money from legacies, bequests or even the funds of deposed political leaders. Although largely West African in origin, these approaches have come from as far apart as South Africa and Holland.

Getting the money is invariably conditional on the charity sending these "solicitors" its details, letterhead and/ or a range of "advanced fees". None of these approaches have ended in money being handed over to the charity and many have found that sending details results in money being taken from the charity's bank account. Even sending a letterhead could be asking for trouble.

Our advice to charities is not to respond and to refer such approaches to the West African Organized Crime Section at NCIS (National Criminal Intelligence Service) at PO Box 8000, London SE11 5EN or via e-mail at: westafrican@spring39.demon.co.uk. Further information on NCIS can be found at www.ncis.gov.uk "

In the past, business-persons in India have been approached by similar groups from Nigeria, promising large business deals. It is possible that NGOs in India will be their next target.

22: Fellowship of the Ring…

(19-Jun-01)

If you are receiving fellowship, scholarship or stipend (exceeding Rs.36,000 p.a.) from a foreign source, you must file form FC-5 with Ministry of Home Affairs.

Many fellowships offered by Indian NGOs are ultimately funded by foreign sources. Form FC-5 should be filed in such cases also.

[This does not apply if you have only received a set of Tolkien from a foreign source. - Ed.]

23: FC Funds from CAPART?

(21-Jun-01)

Can a grant from CAPART be FC fund? The answer seems to be 'Yes'.

CAPART is an autonomous body registered under the Societies Registration Act 1860. It is functioning under the aegis of the Ministry of Rural Areas and Employment, Government of India.

CAPART is also registered under FCRA. Some of its funds come from foreign sources such as DANIDA. These funds are passed on to NGOs also (see http://capart.nic.in/vscapart/function.htm#INTERNATIONAL).

Therefore, it is possible that a CAPART grant to you may have come from CAPART's FCRA account. If so, you must deposit this in your FCRA bank account and report it in FC-3 in the second or subsequent recipient column.

[The above is a general statement. Please confirm the source of your grant with CAPART before taking any decision on this. (e-mail: capart@caparthq.delhi.nic.in)

23A: Revenue Stamp - limit

(25-Jun-01)

A revenue stamp is required only for transactions exceeding Rs.500. No stamp is needed if the amount is Rs.500.

Stamp duty is levied under the Indian Stamp Act, 1899. For more information on this, see AccountAble 34 at www.AccountAid.net.

24: Revenue Stamp and donations

(26-Jun-01)

Revenue stamp is not needed on receipts for donation. These are payments without consideration. [Exemption b. Article 53, schedule I of the Indian Stamp Act, 1899.]

Apparently, this exemption does not apply to grants from donor agencies.

25: Revenue Stamp on office advances

(28-Jun-01)

Revenue stamp is not required when you give advance to a staff member for office expenses. Similarly, no revenue stamp is required when you receive a refund from such advance. These are payments without consideration.

[Exemption b. Article 53, schedule I of the Indian Stamp Act, 1899. In re Burn & Co. 37 Cal. 346]

26: The First Accounting Manual

(29-Jun-01)

Kautilya's Arthashastra (~300 BC) is the world's first known systematic treatment of accounting concepts, including modern ones, such as changing prices, distinction between work in process, finished goods, raw materials, as well as current and deferred revenues.

[Kautilya, also known as Vishnugupt Chanakya, was the Prime Minister during Chandragupta Maurya's reign. – Ed.]

[Source: Bhattacharya 1988: Modern Accounting Concepts in Kautilya's Arthashastra; confirmed by Richard Mattessich in 'Accounting, Business and Financial History, Volume 8, Number 2, 1998; also in 'The Beginnings of Accounting and Accounting Thought' ISBN 0-8153-3445-1]

27: FEMA and FCRA

(1-Jul-01)

FEMA applies to all NGOs in India [sec.2(u) read with sec. 3 etc. of FEMA]. But this does not mean that FCRA will not apply. FCRA applies to NGOs in addition to FERA [sec.3 of FCRA].

[FEMA: Foreign Exchange Management Act, 1999; FCRA: Foreign Contribution (Regulation) Act, 1976. Both are applicable in India.]

28: Gujarat Earthquake: FCRA relaxation upto 31-August

(5-Jul-01)

Relaxation of prior-permission procedures for Gujarat Earthquake Relief has been extended upto 31st August 2001.

The MHA press-release dated 30th May 2001 is available at http://mha.nic.in/pr052001.htm.

It is also available at www.AccountAid.net.

[FCRA: Foreign Contribution (Regulation) Act, 1976. Applicable in India.]

29: Consolidated TDS Certificate – Form 16A

(27-Jul-01)

Are you tired of issuing TDS certificates in 16A every month? If yes, read fourth proviso to Income Tax Rule 31(3).

According to this rule, you can issue one consolidated annual TDS certificate to each party in 16A. There are only two conditions for this: 1. The party should give you a request for this. 2. There should be more than one payment in the year.

[NGOs are required to deduct tax at source in some cases, such as professional fees. For this, they must issue a TDS certificate. This allows the payee to claim a tax credit.-Ed.]

30: Advocacy and FCRA

(31-Jul-01)

Supporting an advocacy program in India? Go ahead, but make sure that FC funds do not reach Indian journalists (sec. 4).

This restriction includes fellowships, scholarships and stipend. However, journalists are not prohibited from going on sponsored foreign trips (sec.7).

This restriction does not apply when a journalist is working for a foreign newspaper or media group.

Penalty for violation? Up to five years in prison or fine or both (sec 23).

A journalist is defined as correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper.

31: Consultancy contracts and FCRA

(1-Aug-01)

Does FCRA apply to consultancy contracts also? Yes, IF the contract is with an NGO and the NGO receives funds under the contract.

[Section 2(1)(c) read with section 6(1) of Foreign Contribution (Regulation) Act, 1976, applicable to India]

32: Form FC-3 revised again

(6-Aug-01)

Form FC-3 has been revised again with effect from 26^th July 2001. There are three significant changes:

You have to now separately disclose interest earned on FCRA bank account and investments. This practically means an end to the old controversy about whether this interest is foreign contribution or not.
The earlier form contained 27 items under which you classify FC utilization. This list is now expanded to 56 items.
Establishment expenses have been further sub-classified to show things like corpus, land, salaries, publications etc.

Strictly speaking, this means that all FC-3 filed after 26-7-01 should be in the new format. However, in practice, the FCRA Department may allow FC-3 for 2000-01 to be in the old format.

[Notification number GSR 557(E) dated 26-7-01; published in The Gazette of India, part 2, no. 387 dated 26-7-01. FCRA means Foreign Contribution (Regulation) Act, 1976, applicable to India.]

33: FCRA being repealed – Curse of the Monkey’s Paw?

(9-Aug-01)

Several NGO groups have been demanding for a long time that FCRA should be repealed. The Government has apparently granted their wish.

However, FCRA 1976 is likely to be replaced with a tougher law. The new law is designed to plug existing loopholes. It is expected that this will help ensure that funds are not used for religious conversions or by subversive elements.

The new bill is with the cabinet and is likely to be introduced in the current session of the parliament. FCRA has not been amended since 1985, though these were proposed several times e.g. in 1988 and again in 1995.

[Nearly a hundred years ago (1902), W.W. Jacobs wrote a story titled "The Monkey's Paw” . This was later adapted for the stage by David Mauriello. The moral of the story is: Be careful what you wish for – it just might come true!

Curiously, the spell on the monkey’s paw had been put by an Indian fakir!!

The full story is available at http://gaslight.mtroyal.ab.ca/mnkyspaw.htm. – Ed.]

[Source: Times of India, New Delhi 7-Aug-01: Centre to control foreign fund flow]

34: Valuation of Pragati Maidan - concept of nominal pricing

(10-Aug-01)

The Pragati Maidan complex at Delhi is shown at Rupee 1 in the ITPO Balance Sheet. Why? Because the Government sold the land to them for a nominal price of Re.1. Its market price at that time would have been billions of Rupees.

How did the concept of nominal pricing come into accounting? We don’t know for sure.

However, a clear-cut link is given in Adi Parva of Mahabharata. Mahabharata war is estimated to have occurred around 1400 BCE. Adi Parva relates to period much before that.

The link is in a dialogue between Vasuman and King Yayati. Yayati refuses to accept a donation of good deeds from Ashtak and then again from Pratardan.

At this Vasuman says: ‘O King. I give all my worlds to you. If you are hesitating to take these as a donation, then you can buy these for a blade of grass.’

Yayati responds: ‘This sale-purchase is a complete fiction. I have never entered into such transactions. Why should I do this, when no true person does it?’

[Note: The land was originally sold to Trade Fair Authority of India. It merged with TDA in 1991 to form ITPO. – Ed.

Also see AccountAid Capsule 26: The First Accounting Manual]

[Sources: 1. For ITPO fixed asset schedule: http://www.indiatradepromotion.com/a_r1998-99-en/42a.htm#fixed_assets

2. For the dialogue between Yayati and Vasuman: Page 47. Sankshipt Mahabharata, First Part. Geeta Press, Gorakhpur. 24th edition Vikram Samvat 2056.]

35: FCRA and Electronic Media

(11-Aug-01)

You cannot give foreign contribution to a journalist (see capsule 30). But the same restriction does not apply to media-persons with TV networks!

Why? Is it because the Government thinks very highly of TV networks?

No. It’s just that the FCRA has not been amended since 1985. At that time, electronic media was under Government control. So there was no need to extend the restriction to TV networks.

It is possible that the Government will take care of this also in the new FCRA bill.

36: FCRA and “organisations of a political nature”

(14-Aug-01)

Till May’98, 128 organisations had been notified as organizations of a political nature.

These include some well-known names such as ABVP, AIDWA, AIDSO, Anand Marg, NFPW, NSUI, PUCL, PUDR, RSS, SGPC, SIMI, Tabligh Jamat, and VHP.

Full list (upto May-98) can be viewed at www.AccountAid.net.

Such organizations can not be given FC registration. They must apply to the Central Government in form FC-1 for permission before accepting any foreign contribution.

[section 5 of Foreign Contribution (Regulation) Act, 1976. Applicable in India]

37: The origins of double entry book-keeping - 1

(16-Aug-01)

Who invented double-entry system of book-keeping? Just as in the case of fire and wheel, no one knows this really.

But we know that an Italian monk named Luca Pacioli was the first to make it popular on a large scale. In 1494 he published a book called “Everything About Arithmetic, Geometry and Proportion” (Summa de Arithmetica, Geometria, Proportioni et Proportionalita). Book-keeping was one of the five topics in this book. The book became widely available, thanks to the Guttenberg press (which had just been invented by the Germans).

[Source: web-site of Association of Chartered Accountants in the US]

38: The origins of double entry book-keeping - 2

(17-Aug-01)

Luca Pacioli did not claim to be the inventor of double entry book-keeping. He gave credit for this to one Benedetto Cotrugli (Benedikt Kotruljevic of Dubrovnik, Croatia).

Cotrugli had written about double entry system in his book called “Of Trading and the Perfect Trader” (Delia Mercatura et del Mercante Perfetto). This book was written around 1458 but not published for more than a hundred years.

It is also believed that traders and bankers in Venice were using some concepts of double entry book-keeping a hundred years before Cotrugli wrote his book.

ACAUS believes that this had become possible due to introduction of Arabic numerals to Europe, which were a big improvement over Roman numerals (I, II, V, IX…). But that is another story (Capsule 4: The Number System).

[Source: web-site of Association of Chartered Accountants in the US]

39: Donation from Jet Airways…

(18-Aug-01)

Jet Airways Pvt. Ltd. is a company registered in India. Tailwinds Ltd., a company registered in Isle of Man, UK, owns all its shares. Mr. Naresh Goyal, who holds an Indian passport, owns all the shares of Tailwinds Ltd.

Jet Airways makes a donation to an Indian NGO. Will this be treated as Indian or as foreign contribution?

According to our understanding of FCRA, this will be a foreign contribution. According to FCRA, Jet Airways is a subsidiary of a foreign company (Tailwinds). Therefore, Jet becomes a foreign source.

[Source: Press release by Jet Airways on its ownership structure, published in Indian Express, Delhi, page 2, 18-Aug-01

Sec. 2(1)(e)(iii), (iv) of Foreign Contribution (Regulation) Act, 1976

Sec. 591 of The Companies Act, 1956]

40: FCRA and newspapers

(20-Aug-01)

NGOs registered under FCRA are not allowed to bring out newspapers or magazines with FC funds. They can not bring out a newspaper with Indian funds either.

The restriction does not apply if the newspaper / magazine does not contain any public news or comments on public news.

For more information, please see AccountAble 42: FCRA Registration.

[Section 1(1) and part VA of The Press and Registration of Books Act, 1867; Section 4(1)(b) of Foreign Contribution (Regulation) Act, 1976. Applicable in India]

41: Newsletter or newspaper?

(21-Aug-01)

What is the difference between a newsletter and a newspaper?

A newsletter contains ‘informal or confidential news’ which is of interest internally only (WBD).

A newspaper contains ‘public news or comments on public news’ (PRBA). Many people may be interested in such news.

‘News’ means ‘something told as having just happened; information about something that has just happened or will soon happen’.

If your newsletter contains public news, then it will be treated as a newspaper. Marking it as ‘For Private Circulation only’ will not help.

[References:

Section 1(1) and part VA of The Press and Registration of Books Act, 1867 (PRBA)

Section 4(1)(b) of Foreign Contribution (Regulation) Act, 1976 (FCRA). Applicable in India

The World book Dictionary (WBD), 1996. pp. 1400-1401]

42: Checklist for NGO newsletters…

(22-Aug-01)

If you have FCRA registration and are bringing out a newsletter, make sure it does not contain:

q public news;

q comments on public news;

q political news;

q views or comments on political news;

q article or reference criticizing or commenting on any religion, faith, ritual or practice;

q any objectionable material related to things listed in proviso to section 10 of FCRA.

If the above conditions are not met, then marking it ‘For Private Circulation only’ does not help.

[References:

Section 1(1) and part VA of The Press and Registration of Books Act, 1867 (PRBA)

Section 4(1)(b) of Foreign Contribution (Regulation) Act, 1976 (FCRA). Applicable in India

Declaration in Form annexed to S.O. 760(E) dated 3-Aug-87. Published Gazette of India on same date]

43: Myriads of stars…

(23-Aug-01)

Do large numbers scare you? Did you just scrape through in arithmetic at school?

Don’t be embarrassed – you are in illustrious company!

The ancient Greeks, who gave us philosophers like Aristotle and Plato, also had problems with numbers. So much so that they could count only up to 10,000.

In fact, their term for 10,000 was ‘myriad’ (pronounced like ‘period’ with a short ‘e’ sound).

The word ‘myriad’ also meant (and still does) ‘countless’ or ‘an indefinitely large number’!!

[Source:

P. 14. History of the Accountancy Profession in India – vol. 1; 1973; G. P. Kapadia. Published by ICAI.

P. 663. Webster’s New Encyclopedic Dictionary; 1993. ISBN: 0-9637056-0-1

The Greek root for myriad was ‘myrioi’. Pythagoras and Euclid were also Greek. The Greek civilization flourished around 6^th- 4^th century BCE and the modern world owes much to the Greeks. – Ed.]

44: HDFC Donation

(24-Aug-01)

The Government of India promoted HDFC in the ‘70s. It is involved in housing finance. In April 2000, HDFC gave Rs.50,000 to an Indian NGO from its own resources. Would this be FC or Indian donation?

Answer: FCRA. Foreign investors own more than 56% of HDFC.

Moral of the story: Beware…

[Source: Section 2(1)(e)(vi) of Foreign Contribution (Regulation) Act, 1976. Applicable in India

Shareholding information on HDFC web-site at www.hdfcindia.com

The above situation is fictional and designed for academic purpose only.
Information on HDFC shareholding is valid as of 25-Apr-2000. – Ed.]

45: Teasers on Tehelka and FCRA

(27-Aug-01)

Tehelka.com is owned by Buffalo Network Pvt. Ltd. Majority shares of Buffalo Network Pvt. Ltd. are held by Indians.

Sometimes ago Tehelka reporters carried out a sting operation to expose corruption in arms deals. For this, a company called Westend International was formed and registered in London. Tehelka reporters, posing as Westend employees, paid bribes and/ or provided gifts and ‘hospitality’ to some politicians and government servants. Much of this evidence is on video and audiotapes.

Tarun Tejpal, the editor-in-chief of Tehelka.com, has said the seed money of his web newspaper, that his reporters used to bribe the politicians and military officers in India’s biggest investigative media scoop, came not from benami sources, but from the seed venture capitalist funding.

Teaser 1: Is Westend International a foreign source as defined in section 2(1)(e) of FCRA?

Teaser 2: Did the politicians and government servants violate section 4 or section 9 of FCRA in accepting these ‘donations’, gifts or ‘hospitality’?

Teaser 3: Did the Tehelka team members also violate section 4 in ‘assisting’ the politicians / government servants in this?

Teaser 4: Can the politicians or the Tehelka investigators, be penalized under section 23 or section 25 of FCRA?

[Source: Foreign Contribution (Regulation) Act, 1976 (FCRA). Applicable in India. Full text at www.AccountAid.net

The above is based on various news reports and internet sources and may not be true or accurate. It has been designed for academic purpose only. – Ed.]

46: Cost of publishing accounts

(30-Aug-01)

From 2001-02, large non-profits have to publish their accounts in a local newspaper (see Capsule 15).

How much will this cost? Current rates in Delhi range from Rs.100 per column cm in Veer Arjun to Rs.2,050 per column cm in Times of India. Others include: Statesman @Rs.250, Dainik Jagran @Rs.400 and Punjab Kesari @Rs.450.

You need about 12 column cm for brief accounts and 30 column cm for more detailed accounts.

If you select an economical option such as Veer Arjun or Statesman, then the advertisement will cost you between Rs.1,200 to Rs.7,500 per annum.

47: Charging Depreciation

(4-Sep-01)

If an NGO has any commercial or business activities (no matter how small), the Accounting Standards apply to the entire organization.

These include AS-6: Depreciation Accounting. According to this, you should charge depreciation on assets. You should also disclose related information. This standard became applicable from 1^st April 1995.

If you don’t follow this standard, your auditors will have to mention this in their audit report.

[References: AS-6: Depreciation Accounting. Full text at http://www.icai.org/

ICAI clarification on applicability of accounting standards to NGOs, The Chartered Accountant, Sep-95, Page 79

AccountAble 6: Accounting Standards. www.AccountAid.net]

48: Don’t lose your vouchers

(8-Sep-01)

World Bank refused to reimburse Rs.4.49 crores to the West Bengal Government. This money had been spent on different projects (vocational training, safe motherhood, shrimp farming, AIDS, sericulture etc.) up to 31-Mar-1998.

Reason? No vouchers are available for these amounts!

Another Rs.11.53 crores was not reimbursed on account of diversion.

Together, this comes to about 10% of the total amount claimed (Rs.170.27 crores).

[References: Para 3.6.6.2; CAG Report for the year ended March 1999: Report no. 2 (Civil) of 2000 - Government of West Bengal http://www.cagindia.org/states/westbengal/2000_civil2/index.htm

This loss relates to eight projects funded by IDA from 89-90 to 31-Mar-98 under separate credit / loan agreements. – Ed.]

49: Disclosing donations in Indonesia

(17-Sep-01)

Indonesian Parliament has passed the ‘Law on Charity Foundations’ in July this year.

Some of the rules:

Donations above $70 (~INR 3,300) must be publicized.
The Justice Ministry must ratify new Foundations.
Justice Ministry can withdraw the license of any foundation it regards as a ‘threat to public welfare’.

[References: Dini Djalal, “A Small Matter of Trust,” Far Eastern Economic Review, September 20, 2001, p 26]

50: Income Tax form 3A Changed

(19-Sep-01)

People who keep complaining that nothing ever changes in India should take a look at the Income Tax Rules. On an average, these change every 40 days or so!

The latest change is form 3A, which is used by non-profits to report their income. The revised form has been issued on 17-Aug-01.

You should use the revised form for any returns filed after this date.

The new form has been completely revamped and looks smarter.

[References: Income Tax (Twentieth Amendment) Rules, 2001. Notification no. 248 of 2001, dt. 17^th August 2001

Gazette of India, Extraordinary, Part II, s. 3(ii) dt. 17^th August 2001

(2001) 169 CTR (Statutes) pp. 66-78]

51: Related Party Disclosure

(1-Oct-01)

AS-18, issued by the ICAI became applicable on 1^st April 2001. This Accounting Standard covers disclosing names of and transactions with related parties.

Accounting Standards apply to NGOs also in some cases. For more information on this, see ‘AccountAble 6: Indian Accounting Standards’ at http://sites.netscape.net/acontaid/AccountAble_Web/AccountAble_Listing.htm.

This means that many NGOs will have to disclose salary and other payments to Chief Functionary, top management and associated NGOs.

This disclosure will form part of annual audited financial statements. This applies from financial year 2001-02.

[References:

‘AccountAble 6: Indian Accounting Standards’ at www.AccountAid.net

Institute of Chartered Accountants of India at www.icai.org]

52: FCRA for Universities and Institutes

(3-Oct-01)

FCRA regulations cover all Universities and Institutes in exactly the same way as any other NGO.

This is because these are ‘associations’ within the definition of section 2(1)(a), and also have a definite educational programme [section 6(1)].

So if you are planning to give a grant or consultancy assignment (out of FC funds) to IIM, IIT, IRMA, JNU etc., make sure that they have obtained FCRA registration or taken prior-permission.

[References:

Foreign Contribution (Regulation) Act, 1976. Applicable in India. Text at www.AccountAid.net]

53: FCRA ordinance to be issued?

(8-Oct-01)

According to a news report, the Government is planning to issue an ordinance on FCRA soon. The ordinance contains strict measures to prohibit funding to terrorist groups, particularly those in J&K, Northeast and some Southern states.

The ordinance will later be passed as an Act of Parliament.

[References:

“Ordinance soon to nip terrorist fund-raisers:, The Pioneer, New Delhi, 7-Oct-2001, p.4. Also at www.dailypioneer.com

FCRA means Foreign Contribution (Regulation) Act, 1976. Applicable in India

Also see AccountAid Capsules 9, 10, 33 and 54 at www.AccountAid.net]

54: Laundering foreign contribution?

(8-Oct-01)

A news report in ‘The Pioneer’ narrates how J&K police had uncovered a trans-national network of money launderers in 1997.

The persons involved in this were bringing in money, apparently for philanthropic purposes but were diverting it to militants. To do this, a trust was set up by a Jamat-e-Islami worker in 1991.

The initial amount for the trust came from ISI, Pakistan via Saudi Arabia. Later, the money went through regular channels to Delhi, where it was paid to business houses as an advance. Finally it found its way to a leader of the Hizbul Muzahideen in north Kashmir.

[References:

“Ordinance soon to nip terrorist fund-raisers:, The Pioneer, New Delhi, 7-Oct-2001, p.4. Also at www.dailypioneer.com

ISI means Inter Services Intelligence.

Also see AccountAid Capsules 9, 10, 33 and 53 at www.AccountAid.net]

55: Gujarat Earthquake – FCRA relaxation extended

(15-Oct-01)

Yes. It’s been extended again. This time the extension is upto 31^st December 2001.

[References:

Also see AccountAid Capsules 6 and 28 at www.AccountAid.net

Full text of the press release dated 31-Aug-01 at www.AccountAid.net and at http://mha.nic.in/pr082001.htm#31081]

56: The Coolest One…

(16-Oct-01)

Once upon a time, there was an NGO in Kerala. One day they bought a refrigerator for Rs.5,445. They kept it at the Managing Trustee’s house in Kottayam.

The income tax people wanted to know the reason for this.

The NGO said: ‘Our office building was not ready. We wanted to offer cold water to our Swedish donors’.

Result? Tax people rejected the explanation and withdrew the NGO’s income tax exemption. The High Court also confirmed it.

Moral of the story? Make sure the Trustees or key persons do not use the NGO’s assets. And if they are used, recover hire charges from them.

[References:

Agappa Child Centre v. CIT, (1997) 137 CTR (Ker) 295

Section 13(2) of Income Tax At, 1961. Applicable in India

AccountAble 52 at www.AccountAid.net]

57: Perquisites, Form 12BA and Form 16

(18-Oct-01)

Income Tax Department has changed the rules (Rule 3) for valuation of perquisites to employees. The change is applicable from 1^st April 2001.

A new form (no. 12BA) has been introduced. This form will show the valuation of the perquisites. This form will be used where the employee is getting more than Rs.150,000 per year.

Form 16 (TDS certificate) has also been changed.

[References:

Income Tax notification no. 313 of 2001, dtd. 25^th Sep 2001. Applicable in India

(2001) 170 CTR (Statutes) 64]

58: Sale of FCRA assets

(18-Nov-01)

Can you sell off assets purchased with FCRA funds?

Yes, you can sell these assets, if the donor does not object. You don't need any permission from FCRA people for this.

But what do you do with the money you get?

You should deposit the money in the FCRA bank account. And show it as a receipt in the FC-3 and FCRA Receipts & Payments Account.

And yes, if the value of the asset has gone up, the extra money also

goes into FCRA account.

[References:

FCRA means Foreign Contribution (Regulation) Act, 1976. Applicable in India

Also see AccountAble 22: Mysteries of FCRA on www.AccountAid.net]

AccountAid Capsules in 2002 (59-…)

AccountAid Capsules have been launched as an experiment. These are small, mild and hopefully without side effects. Unlike other medicines, you can pass these on to your friends, without a doctor's prescription. Reactions (particularly allergic ones) are most welcome.

Prescribe: To get on to the list, send a blank e-mail to ‘accountaid-subscribe@topica.com’

Or click on: Register for AccountAid Capsules

See also:

AccountAid Capsules –

In 2001 (1 – 58)

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(on Netscape)

To register for AccountAble, click on:

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[2] Section references are to Income Tax Act, 1961, which applies to India.