What is Accounting?

It is a systematic process of identifying, recording, measuring, classifying, verifying,summarizing, interpreting and communicating financial information about economic entities

Accounting is also called as the “language of business”

It provides information on the:-

1. Resources available to the entity
2. The means employed to finance those resources
3. The results achieved through their use

Functions of accounting

1. Preparing and/ or collecting financial information & related records & documents.
2. Rearranging and classifying such financial information
3. Generating & sharing information summaries & reportsfrom such financial information.
4. Establishing controlsto ensure integrity of such financial information.

What is an “Account”?

A systematic and summarized record of business transactionsis known as an “Account”
It lists transactionsfalling undersame description/ nature for a given period of time.
It lists transactionsfalling undersame description/ nature for a given period of time.

Frequently Asked Questions (FAQs)

What is meant by Trust?

As per Section 2 (13) B.P.T. Act, 1950 means an express or constructive trust for either a public religious or charitable purpose or both and includes a temple, a math, a church, synagogue, or other place of public religious worship, a dharmada or any other religious or charitable endowment and a society formed either for a religious or charitable purpose or for both and registered under the Societies Registration Act, 1860.

What are the types of Trust?

Trust may be either private trust or a public trust. Depending on the nature of trust, they are classified for maintenance of record under B.P.T. Act, 1950.

Is Trust registration mandatory?

Yes. Every public charitable or religious trust is required to be registered.

What are the benefits in forming a Trust?

Trust ones registered gets a legal entity and is governed by provisions of Bombay Public Trusts Act, 1950. The entire supervision and control of the registered trust is with the Deputy or Assistant. Charity Commissioner of Maharashtra being the custodian of trust. The income and expenditure of the trust is properly regulated with annual audit from competent authority.

What can be the objects of the Trust?

The objects of the trust must be either the religious or charitable. The charitable and religious objects may be of any kind including imparting education, providing medical aid, helping the poor etc.

What is a charity commissioner, and why do NPOs need to register under them?

A charity commissioner is a regulatory authority responsible for overseeing and regulating charitable organizations and trusts. NPOs often need to register under the charity commissioner to gain legal recognition, access benefits, and operate transparently.

What types of organizations are eligible to register under the charity commissioner?

Generally, charitable trusts, societies, and other non-profit entities engaged in activities that promote the public welfare, such as education, healthcare, poverty alleviation, religion, culture, and more, are eligible to register.

What benefits do NPOs gain from registering under the charity commissioner?

Benefits can include legal recognition, tax exemptions, eligibility for government grants, enhanced credibility, transparency through regular reporting, and the ability to issue tax-exempt donation receipts to donors.

Is it mandatory for NPOs to register under the charity commissioner?

In many jurisdictions, registration might not be mandatory but is highly recommended for the benefits it offers. However, some activities or fundraising efforts might require registration for legality and transparency.

Are there any ongoing compliance requirements after registration?

Yes, registered NPOs often have to submit annual financial reports, progress reports, and updates on their activities to the charity commissioner. Compliance ensures transparency and accountability.

What responsibilities do trustees or members have after registration?

Trustees/members are responsible for adhering to the organization's objectives, managing its affairs, maintaining proper financial records, and submitting required reports to the charity commissioner.

What information should be included in the annual budget?

The annual budget should include detailed information about the trusts expected income and expenses for the succeeding financial year. This might include revenue sources (donations, grants, investments), anticipated expenses (program costs, administrative costs), and any surplus or deficit.

What is the purpose of filing an annual budget with the charity commissioner?

Filing an annual budget with the charity commissioner is a way for charitable organizations to provide transparency regarding their financial activities. It helps ensure that the organization is using its resources for the intended charitable purposes and complying with applicable laws and regulations.

What supporting documents should be submitted to the charity commissioner?

The documents such as estimated receipts and expenditure, details of the Trust and copy of Declaration.

What is the due date for filing the Annual Budget?

The due date for filing Annual Budget is 28th February i.e. at least one month before the commencement of succeeding year.

How do we need to submit the Annual Budget?

The Annual Budget need to be submitted offline to the Charity Commissioner office of Maharashtra.

What are the late fees and penalties if the Annual Budget is filed late?

The amount of late fees and penalties can vary based on the specific regulations and time frames set by the Charity Commissioner's office.

What is the purpose of submission of trust's account to the charity commissioner?

The submission of a trust's account to the charity commissioner involves providing financial statements and reports of the trust's income, expenses, assets, and liabilities for regulatory compliance.

Why is it necessary to submit the trust's account?

Submitting the trust's account is a legal requirement to ensure transparency, accountability, and proper utilization of funds for charitable purposes.

How often do I need to submit the trust's account?

Submission of trust’s account is an annual requirement.

What documents are needed for submitting the trust's account?

Documents required include balance sheets (Schedule VIII), income and expenditure statements (Schedule IX), audit reports, Statement of Income liable to Contribution during the year end (Schedule IX C), Affidavit (in case submission of accounts happens after September 30), CA Membership Certificate issued by ICAI and Corpus Fund Certificate.

What is an audit report, and is it mandatory?

An audit report is an independent assessment of the trust's financial statements and an audit report by a chartered accountant is mandatory for trusts.

What is the due date for submitting the trust's account?

The due date for submission on the financial year-end of the trust accounts i.e., 30th September of the financial year.

What are the late fees and penalties if the Trust’s Account are submitted late?

The exact amount of late fees and penalties can vary based on the specific regulations and time frames set by the Charity Commissioner's office.

What is a change report?

A change report is a formal document filed with the Charity Commissioner to report any significant changes in the structure, management, or activities of a charitable organization registered under the relevant laws.

When should a change report be filed?

A change report should be filed promptly whenever there are changes within the organization, such as changes in trustees, office bearers, objectives, address, or any other significant alteration.

What are some changes that require to filing a change report?

Changes include changes in name of trustees, change in objects, changes in the trust name, address etc.

What is the purpose of filing a change report?

Filing a change report helps maintain transparency and accountability of charitable organizations. It keeps the Charity Commissioner informed about changes that might impact the organization's compliance with regulatory requirements.

What are the late fees and penalties if the Change Report is filed late?

The amount of late fees and penalties can vary based on the specific regulations and time frames set by the Charity Commissioner's office.

What happens after submitting the change report?

After submission, the Charity Commissioner's office will review the report and supporting documents. If everything is in order, they will update the organization's records accordingly.

What if I don't file a change report?

Failing to file a required change report can result in legal and compliance issues. The organization might lose its charitable status or face penalties for non-compliance.

Knowledge Primer - Introduction:

The office of the charity commissioner is a government official or regulatory authority responsible for overseeing and regulating charitable organizations and activities that operate for charitable, religious, educational, or social objectives.

Benefits for NPO obtaining registration under Charity Commissioner:

• Enhances trust's credibility, making it easier to attract donors, supporters, and partners.
• Enhance its goodwill and the confidence of those associated with the NPO.
• Enhance Transparency and Accountability.

Filing of Annual Budget:

It is a statement of the estimated Receipts and Expenditure of the succeeding financial year.

Annual Budget contains:

• Estimates of all Operational and Capital Receipts.
• Details of Source of the revenue.
• Estimates of all Operational and Capital Expenditure.
• Details of the actual receipts and expenditure of the succeeding financial year and the reasons for any deficit or surplus in that year.

The economic and financial policy of the succeeding year.

• Applicability: It is applicable for trusts whose Annual Income exceeds Rs. 10,000/-
• Submission: The estimated duly signed and stamped copy of the Annual Budget of the succeeding financial year along with the Copy of Declaration should be submitted offline to the Charity Commissioner Office of Maharashtra.
• Due Date of Annual Budget: The due date for filing Annual Budget is 28th February i.e. at least one month before the commencement of succeeding year.

Trust’s Account Submission:

• A Trust whose yearly annual income exceeds Rs. 5000/- has to submit Auditor’s Report, Schedule VIII (Balance Sheet), Schedule IX (Income & Expenditure) & IX-C (Statement of Income liable to Contribution during the year end).

Types of Trust's Accounts:

• Trusts whose annual income is above Rs.5000/-
• Trusts whose annual income is below Rs.5000/-

Submission:

• The copy of the Acknowledgement Duly Signed by 3 Trustees and the Auditor or CA should be submitted offline to the Charity Commissioner Maharashtra.

Due Date of Submission of Trust’s Account:

• The due date of submitting the Trust’s Account within two months from the date balancing the accounts i.e., 30th September of the financial year.

Filing of Change Report:

• It refers to a report submitted to the office of the charity commissioner or regulatory authority to notify them about significant changes or events within a registered trust.
• A change report is a document that records any changes made in NPO registered under the Indian Trust Act 1882.
• The trustees of the trust are required to intimate any change that occurs in any entries recorded in the register within a period of 90 days from the date of the occurrence of such change, or where any change is desired in such entries in the interest of the administration of such public trust.

Instances in which a Change Report is filed:

• Appointment of new Trustee
• Removal of old Trustee
• Name or Address change of Trustees
• Change of address of Trust
• Trust Name and Registration Number
• Change in Trust Objects, Rules, Regulations and Constitution
• Adding of Property Details – Moveable & Immovable Property

The purpose of a change report is to keep the regulatory authority informed and to ensure transparency and accountability within the charitable sector.

Investment of Public Trust Money:

The NPO if wants to invest in Public Trust money then, they have some Permissible modes of Investments which are mentioned below:

Income Tax Return Filing:

• ITR 7 Form filing is done by the NPO who service the income from the properties that are of charitable or religious purposes.
• Properties that are held under the trusts or legal obligation in parts or even wholly are included in the category.

Eligibility for ITR 7 Form filing:

• ITR 7 u/s 139 (4A): Individuals having income from the property that is used solely or partially for charitable or religious purposes and such property is to be held under a legal obligation or trust.
• ITR 7 u/s 139 (4B): This section applies specifically to the political parties. Under Section 13 A the political parties are exempted from filing the income tax return provided that the parties are filing the annual returns through Form ITR 7.
• ITR 7 u/s 139 (4C): Under this the ITR 7 is to be filed by the following entities:
  • Association that is conducting scientific research.
  • News agency
  • Association or Institutions u/s 10 (23A)
  • Other enlisted institutes u/s 10 (23B)
• ITR 7 u/s 139 (4D): Is to be filed by any investment fund that is referred to in section 115 UB. There is no necessity to furnish the returns of income or loss under any provision of this section.
• ITR 7 u/s 139 (4E): Filing the returns of the income done by a business trust.
• ITR 7 u/s 139 (4F): Is to be filed by any investment fund that is referred to in section 115 UB. There is no necessity to furnish the returns of income or loss under any provision of this section.

Employee's State Insurance Act, 1948 Compliances

1. Frequently Asked Questions

   1. What is ESIC?
   2. Employees' State Insurance Corporation (ESIC) is a government organization that manages the Employees' State Insurance (ESI) scheme. The scheme basically provides medical and financial assistance to the employees and their families.
   3. What is the applicability of ESIC?
   4. The ESI Act is applicable to all non-seasonal factories employing 10 or more persons. The wage limit for coverage under the Act, is Rs.21,000/- per month and Rs.25,000/- per month in the case of Persons with Disability.
   5. What is the ESIC Contribution rate?
   6. The employee's contribution rate is 0.75% of the wages. The employer's is 3.25% of the wages paid/payable in respect of the employees in every wage period.
   7. Who is exempt from ESIC contribution?
   8. Employees in receipt of a daily average wage up to Rs.176/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employee.
   9. What is the due date for payment of ESIC contribution?
   10. An employer is liable to pay his contribution in respect of every employee and deduct employee’s contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 15 days of the last day of the Calendar month in which the contributions fall due.
   11. What is the due date for registration under ESIC?
   12. It is mandatory to register under ESIC within 15 days from the date of its applicability.
   13. Which documents are required for registration under ESIC?
   14. Documents required are as follows:
       • Registration Certificate obtained either under the:
         • Factories Act, or
         • Shops and Establishment Act.
       • Certificate of incorporation of the establishment, which are as follows:
         • Certificate of Company Registration in case of a company.
         • Partnership deed in case of a Partnership Firm.
         • GST certificate of the establishment.
         • Memorandum of Association and Articles of Association of the company.
         • Address proof of the establishment. Any one of the following can be submitted as address proof:
           • Utility bills (Electricity bill, gas connection bill or telephone bill of the establishment not exceeding three months)
           • Rental agreement of the land on which the establishment is situated
           • Property tax receipts of the land on which the establishment is situated
         • A list of all the employees working in the establishment.
         • PAN Card of the business establishment as well as all the employees working in the establishment.
         • The compensation details of all the employees.
         • A cancelled cheque of the bank account of the company.
         • List of directors of the company.
         • List of the shareholders of the company.
         • A register containing the attendance of the employees.
   15. What is the procedure for registration under ESIC?
   16. Log in to ESIC portal: www.esic.gov.in
       • Now click on ‘Employer Login’ option
       • On next page click on ‘Sign Up’
       • Fill the details and submit
       • After submitting the form for sign up to the portal, the employer will receive a confirmation mail sent to the registered mail id and mobile number entered at the time of sign up. The email will contain the username and password details for registering as an employer and employee under the ESIC scheme.
       • Now login with the ‘Employer Login’ with received credentials
       • Click on ‘New Employer Registration’ option
       • Select the ‘Type of Unit’ and the ‘Employer Registration- Form 1’ will appear
       • Now fill the details in the form about the unit of the employer, employer details, factory/ establishment details and employee details.
       • Once, the complete form is filled, click on the ‘Submit’ button.
       • After submission of the ESI Registration Form, i.e. Form-1, the ‘Payment of Advance Contribution’ page will open where the employer needs to fill the amount to be paid and select the payment mode. The employer will need to pay the advance contribution for 6 months.
       • On the successful payment of six months advance contribution, the system generated Registration Letter (C-11) is sent to the employer which will contain a 17-digit Registration Number by the ESIC department.
   17. What is the due date and period for filing return under ESIC?
   18. The due date of filing of ESIC return is 15th of Next Month for monthly returns.
       • The ESI returns for half yearly is to be filed within, by 11 November for the first period and by 11 May for the second period.
   19. What is the due date for payment under ESIC?
   20. The due date of payment of ESIC return is 15th of Next Month.
   21. What documents are required for filing return under ESIC?
   22. The following documents must be maintained regularly for filing ESI returns:
       • Attendance register
       • Form 6 register
       • Register of wages
       • Register any accidents on the premises
       • A cancelled cheque of the company
       • Inspection book
       • PAN card of the organization
       • Monthly challans and returns submitted for ESI
   23. What is the procedure for filing return under ESIC?
   24. Upon ESI registration, every employer will have received a user ID and password and a 17-digit code
       • Go to: www.esic.gov.in and log in with the provided credentials
       • On the portal, there will be a list of provisions for modifying employee details. On the right-hand side, click ‘File Monthly Returns’ and ensure the employee details are correct
       • Fill in the bank details and click ‘Submit’ to file the monthly ESI contribution
       • The employer can manually type the contribution against each employee or can upload an excel file as an attachment for bulk upload.
       • After submission, make the online payment by clicking on Pay online.
       • Once the contributions are paid, click the ‘List of actions’ page and press ‘Generate challan’. This challan has to be preserved for inspection
       • Click ‘Self-certification’ under the Monthly Contribution section and tick the checkbox for accepting the declaration. If there are more than 40 employees, the Chartered accounts certificate must be uploaded.
       • Click ‘Submit’
   25. What is the interest & penalty under ESIC?
   26. Interest: An employer who fails to pay the contribution within the due date shall be liable to pay simple interest at the rate of 12% per annum in respect of each day of delay or default in payment of contribution.
   27. Penalty: Penalties on Delay in payment incurs Penal Charges as follows:
       • Delay up to 2 Months - 5% Interest per annum
       • 2 Months - Less than 4 Months - 10% Interest per annum
       • 4 Months - Less than 6 Months - 15% Interest per annum
       • Exceeding 6 Months - 25% Interest per annum subject to 100 % of contribution

Employees' State Insurance Act, 1948 Compliances

1. Knowledge Primer

   1. Introduction:

      • Employees' State Insurance Corporation (ESIC) is a government organization that manages the Employees' State Insurance (ESI) scheme. The scheme basically provides medical and financial assistance to the employees and their families.
      • This act extends to the whole of India.

   2. Applicability:

      • The ESI Act is applicable to all non-seasonal factories employing 10 or more persons.
      • The wage limit for coverage under the Act is Rs. 21,000/- per month and Rs. 25,000/- per month in the case of Persons with Disability.

   3. ESIC Contribution rate:

      • The employee's contribution rate is 0.75% of the wages.
      • The employer's contribution rate is 3.25% of the wages paid/payable in respect of the employees in every wage period.

   4. Exemptions From ESIC Contribution:

      • Employees in receipt of a daily average wage up to Rs. 176/- are exempted from payment of contribution. Employers will, however, contribute their own share in respect of these employees.

   5. Due date for payment of Contribution:

      • An employer is liable to pay his contribution in respect of every employee and deduct employee’s contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 15 days of the last day of the Calendar month in which the contributions fall due.

   6. Registration under ESIC:

      • It is mandatory to register under ESIC within 15 days from the date of its applicability.
      • The employer must file Form 1 for registration. On successful registration of the establishment, returns can be filed online by the employer.

   7. Accounting treatment:

      The accounting entries are passed for booking provision for ESIC contribution of employer & employee and ESIC payment.

   8. Returns:

      • Companies with ESI registration must file the ESI returns once every six months in two periods: From 1 April to 30 September and 1 October to 31 March.
      • The ESI returns have to be filed monthly and half-yearly.

   9. Due date of payment & return filing of ESIC return:

      • The due date of payment & filing of ESIC return is 15th of Next Month for monthly returns.
      • The ESI returns for half-yearly is to be filed within, by 11th November for the first period and by 11th May for the second period.

   10. Interest & Penalties under ESIC:

       • Interest: An employer who fails to pay the contribution within the due date shall be liable to pay simple interest at the rate of 12% per annum in respect of each day of delay or default in payment of contribution.
       • Penalty: Penalties on Delay in payment incurs Penal Charges as follows:
         • Delay up to 2 Months - 5% per annum.
         • 2 Months - Less than 4 Months - 10% per annum.
         • 4 Months - Less than 6 Months - 15% per annum.
         • Exceeding 6 Months - 25% per annum subject to 100 % of contribution.

   11. Closure of ESIC account of employee:

       The closure of an Employee State Insurance Corporation (ESIC) account for an individual employee usually occurs when an employee is no longer eligible for ESIC coverage or when they leave their job.

   12. Surrender of registration of employer:

       Closing an Employee State Insurance Corporation (ESIC) registration typically involves informing the ESIC authorities that your organization no longer meets the eligibility criteria or has ceased operations. You need to visit the nearest PF office where you obtained registration.

Employees' State Insurance Act, 1948 Compliances

1. Standard Operating Procedure

   1. Registration under ESIC:

      • Documents required:
      • Registration Certificate obtained either under the:
      • Factories Act, or
      • Shops and Establishment Act.
      • Certificate of incorporation of the establishment, which are as follows:
      • Certificate of Company Registration in case of a company.
      • Partnership deed in case of a partnership firm.
      • GST certificate of the establishment.
      • Memorandum of Association and Articles of Association of the company.
      • Address proof of the establishment. Any one of the following can be submitted as address proof:
      • Utility bills (Electricity bill, gas connection bill or telephone bill of the establishment not exceeding three months)
      • Rental agreement of the land on which the establishment is situated
      • Property tax receipts of the land on which the establishment is situated
      • A list of all the employees working in the establishment.
      • PAN Card of the business establishment as well as all the employees working in the establishment.
      • The compensation details of all the employees.
      • A cancelled cheque of the bank account of the company.
      • List of directors of the company.
      • List of the shareholders of the company.
      • A register containing the attendance of the employees.

   2. Procedure:

      • Log in to ESIC portal: www.esic.gov.in
      • Now click on ‘Employer Login’ option
      • On the next page click on ‘Sign Up’
      • Fill the details and submit
      • After submitting the form for sign up to the portal, the employer will receive a confirmation mail sent to the registered mail id and mobile number entered at the time of sign up. The email will contain the username and password details for registering as an employer and employee under the ESIC scheme.
      • Now login with the ‘Employer Login’ with received credentials
      • Click on ‘New Employer Registration’ option
      • Select the ‘Type of Unit’ and the ‘Employer Registration- Form 1’ will appear
      • Now fill the details in the form about the unit of the employer, employer details, factory/establishment details and employee details.
      • Once the complete form is filled, click on the ‘Submit’ button.
      • After submission of the ESI Registration Form, i.e. Form-1, the ‘Payment of Advance Contribution’ page will open where the employer needs to fill the amount to be paid and select the payment mode. The employer will need to pay the advance contribution for 6 months.
      • On the successful payment of six months advance contribution, the system generated Registration Letter (C-11) is sent to the employer which will contain a 17-digit Registration Number by the ESIC department.

   3. Returns:

      • Documents required:
      • The following documents must be maintained regularly for filing ESI returns:
      • Attendance register
      • Form 6 register
      • Register of wages
      • Register any accidents on the premises
      • A cancelled cheque of the company
      • Inspection book
      • PAN card of the organization
      • Monthly challans and returns submitted for ESI.

   4. Procedure:

      • Upon ESI registration, every employer will have received a user ID and password and a 17-digit code
      • Go to www.esic.gov.in and log in with the provided credentials
      • On the portal, there will be a list of provisions for modifying employee details. On the right-hand side, click ‘File Monthly Returns’ and ensure the employee details are correct
      • Fill in the bank details and click ‘Submit’ to file the monthly ESI contribution
      • The employer can manually type the contribution against each employee or can upload an excel file as an attachment for bulk upload.
      • After submission, make the online payment by clicking on Pay online.
      • Once the contributions are paid, click the ‘List of actions’ page and press ‘Generate challan’. This challan has to be preserved for inspection
      • Click ‘Self-certification’ under the Monthly Contribution section and tick the checkbox for accepting the declaration. If there are more than 40 employees, the Chartered accounts certificate must be uploaded.
      • Click ‘Submit’

   5. Accounting treatment:

      • Provision Entry:
      • Salary (for the employee portion) A/c Dr To ESIC Contribution payable A/c
      • Employee Benefit Expense (for the employer portion) A/c Dr To ESIC Contribution payable A/c
      • Payment Entry:
      • ESIC Contribution payable A/c Dr To Bank A/c

   6. Closure of ESIC account of employee:

      • Documents:
      • Employee's Request for Closure
      • No-Objection Certificate (NOC) from the Employer
      • Employee's Relieving Letter (if applicable)
      • Employee's ESIC Card and RSIC related documents
      • Procedure:
      • Employee's Request: The employee should submit a written request for the closure of their ESIC account to their employer. The request should include their name, ESIC number, and the reason for closure.
      • Employer's Role: The employer should acknowledge the employee's request and verify that the employee is no longer working with the organization. This can involve providing a relieving letter, an updated employee list, or other relevant documents.
      • Submission of Documents to ESIC: The employer submits the employee's closure request along with the necessary documentation to the local ESIC office. The documents typically include the employee's request, a no-objection certificate from the employer, and any other documents requested by the ESIC office.
      • Verification by ESIC Authorities: The ESIC authorities will review the documents and verify the information provided. They may also conduct their own verification to ensure the employee is no longer employed and eligible for closure.
      • Closure of ESIC Account: Once the ESIC authorities are satisfied with the documentation and verification, they will close the employee's ESIC account. The employee will no longer be covered under ESIC, and their ESIC number will be inactive.
      • Update Records: Both the employer and the employee should update their records to reflect the closure of the ESIC account.
      • Inform the Employee: The employer should inform the employee of the successful closure of their ESIC account and return any ESIC cards or documents if applicable.

   7. Surrender of registration of employer:

      • Documents:
      • Full final Settlement of workers along with evidence, such as acquaintance of all the discharged employees towards full and final settlement;
      • Electricity Connection surrender;
      • Return of I.T. dept. till the date of closure;
      • Return of GST;
      • Telephone connection surrender;
      • Closing of Bank Account;
      • In case of Company, intimation to Registrar of Companies (ROC);
      • Surrender of Trading License, if any;
      • Dissolution of rental deed, lease deed.
      • Procedure:
      • Prepare the Necessary Documents: Gather all the relevant documents, including your ESIC registration certificate and any other supporting documents.
      • Notify Employees: Inform your employees about the closure of ESIC registration. You may need to provide them with alternative health insurance or medical benefits if applicable.
      • Stop Making Contributions: Cease making ESIC contributions for your employees. This includes both the employer's share and the employee's share.
      • Submit a Letter of Closure: Write a formal letter to the ESIC authorities informing them of your intention to close the ESIC registration. Include details such as your organization's name, registration number, the reason for closure, and the date from which you want to close the registration.
      • Return ESIC Cards and Documents: Return the ESIC cards of your employees and any other documents to the ESIC office. This is usually done as a part of the closure process.
      • Settle Dues: Ensure that all outstanding dues to ESIC are settled. This includes any pending payments, if applicable.
      • Receive Acknowledgment: The ESIC authorities will typically acknowledge your request for closure and may conduct a verification process.
      • Wait for Confirmation: Once your request is processed and approved, you will receive a confirmation letter from ESIC authorities regarding the closure of your registration.
      • Inform Employees: Inform your employees that the ESIC registration has been closed and provide them with any necessary information or documents regarding their new health insurance or medical benefits.
      • Maintain Records: Keep records of the closure process, including the acknowledgment and confirmation letters from ESIC, for future reference.

The Foreign Contribution (Regulation) Act, 2010 Compliances

Knowledge Primer

1. Introduction: The Foreign Contribution (regulation) Act, 2010 is an act of the Parliament of India, which regulates Foreign Contributions.

Meaning:

1. Foreign contribution refers to currency (whether Indian or foreign) received in form of donation, delivery or transfer made by a foreign source of any article, currency or any security.
2. Foreign source covers a foreign government or its agency, any international agencies, foreign citizen, foreign company, any other foreign entity such as trade unions, trusts, societies, clubs, etc. formed or registered outside India. It also covers multi-national corporations and any company where more than 50% of the share capital is held by foreign government, entity or citizen.

Eligibility for accepting Foreign Contribution:

1. Any individual, HUF, association or a company registered under section 8 of the Companies Act, 2013 or society registered under Societies Registration Act, 1860 or a trust registered under Indian Trusts Act, 1882, or registered under Bombay Public Trusts Act, 1950, after obtaining the FCRA registration/prior permission from the Central Government, is eligible for Foreign Contribution.

Prohibition to accept foreign contribution (Section 3):

1. Acceptance of Foreign contribution is prohibited to any of the following:
2. Candidate for election
3. Correspondent, columnist, cartoonist, editor, owner, printer or publisher of a registered newspaper
4. Public servant, Judge, Government servant or employee of any corporation or any other body controlled or owned by the Government or member of any Legislature
5. Political party or office-bearer thereof
6. Organization of a political nature
7. Association or company engaged in the production or broadcast of audio news or audio-visual news or current affairs programs through any electronic mode, or any other electronic form or any other mode of mass communication
8. An Indian citizen, who is resident in India or resident outside India, shall not accept any foreign contribution from a foreign source, on behalf of any person.
9. An Indian citizen, who is resident in India or resident outside India, shall not deliver any foreign contribution, which has been accepted from any foreign source, to any person if he knows that such other person intends, to deliver such contribution to any prohibited person.

Foreign Contribution which can be accepted by Section 3 persons:

1. Salary, wages or other remuneration paid to any person or any group of persons working under him, from any foreign source or payment made in the ordinary course of business transacted in India by such foreign source; or
2. Payment made in the course of international trade or commerce or in the ordinary course of business transacted by him outside India; or
3. Any gift or presentation made to him as a member of any Indian delegation, provided that such gift or present was accepted in accordance with the rules made by the Central Government with regard to the acceptance or retention of such gift or presentation or from his relative ;or
4. Remittance received in the ordinary course of business through any official channel, post office, or any authorized person in foreign exchange under the FEMA Act, 1999; or
5. Received any scholarship, stipend or any payment of similar nature.

Registration FC-3A:

Registration is granted to the following:

1. It should be registered under the Societies Registration Act, 1860 or the Indian Trusts Act, 1882 or section 8 of the Companies Act, 2013; or Bombay Public Trusts Act,1950
2. It should be in existence for at least three years and have made significant contribution in chosen area of activity.
3. The NPO should have spent at least Rs.15 lakhs over last three years on its main objects, excluding administrative expenditure.
4. Statement of Income & Expenditure duly audited by Chartered Accountant for last three years must be furnished.

Prior Permission FC-3B:

Prior Permission is applicable to an organization in formative stage and who have not completed three years of existence.

1. Such Organization may apply for grant of prior permission for specific transaction by providing the source such as memorandum of understanding, commitment letter etc.
2. The permission is granted only for the particular transaction.
3. As per section 9A, if the value on the date of final disposal of an application for obtaining prior permission is above Rs. One crore, the Central Government may permit receipt of foreign contribution in such instalments, as it may deem fit. Provided, second and subsequent instalment shall be released after submission of proof of utilization of 75% of foreign contribution received in the previous instalment.
4. Must provide Aadhaar number of all its office bearers, directors or key functionaries, as an identification document or a copy of the passport or the Overseas Citizen of India card for identification in case of a foreigner.

FCRA Account:

The foreign contribution must be received only in an account designated by the bank as "FCRA account" in nearest branch of the State Bank of India, New Delhi. Other than the foreign contribution, no other funds should be received or deposited in this account.

Intimation under FC-1:

Every person who has been granted a certificate of registration or given prior permission shall give an intimation to the Central Government as to the amount of foreign contribution received by it, the source from which and the manner in which such foreign contribution was received and the purposes for which and the manner in which such foreign contribution was utilized by him.

Every person receiving foreign contribution shall submit a copy of a statement indicating the particulars of foreign contribution received duly certified by officer of the bank or authorized person in foreign exchange and furnish the same to the Central Government along with the intimation above.

Renewal of Registration FC-3C:

Any application for renewal of certificate of registration shall be made to Central Government in electronic form in form FC-3C six months before the expiry for their existing registration.

The validity of registration is up to 5 years.

Accounting:

A separate set of accounts and records shall be maintained, exclusively for foreign contribution received and utilized.

Following accounts should be maintained:

1. Receipts and Payment Account
2. Income and Expenditure Account
3. Balance Sheet
4. Certificate by a Chartered Accountant

Administrative Expenses:

Administrative expenditure should not exceed 20% of the foreign contribution received during that particular year.

The Administrative expenditure may exceed the limit of 20% with prior approval of Central Government.

Administrative expenses include the following:

1. Salaries, wages, travel expenses or any remuneration realized by the Members of the Executive Committee or Governing Council of the person;
2. All expenses towards hiring of personnel for management of the activities of the person and salaries, wages or any kind of remuneration paid, including cost of travel, to such personnel.
3. All expenses related to consumables like electricity and water charges, telephone charges, postal charges, repairs to premise(s) from where the NPO is functioning, stationery and printing charges, transport and travel charges by the Members of the Executive Committee or Governing Council and expenditure on office equipment.
4. Cost of accounting for and administering funds
5. Expenses towards running and maintenance of vehicles
6. Cost of writing and filing reports.
7. Legal and professional charges; and
8. Rent of premises, repairs to premises and expenses on other utilities

Exclusions:

1. The expenditure incurred on salaries or remuneration of personnel engaged in training or for collection or analysis of field data of an NPO primarily engaged in research or training shall not be counted towards administrative expenses.
2. The expenses incurred directly in furtherance of the stated objectives of the welfare-oriented organization shall be excluded from the administrative expenses such as salaries to doctors of hospital, salaries to teachers of school etc.

Annual Return:

An NPO permitted to accept foreign contribution is required to maintain Balance Sheet, Income & Expenditure statement and the statement of receipt and payment account for the foreign contribution received and utilized and submit an annual return in Form FC-4, giving details of the receipt and purpose-wise utilization of the foreign contribution.

The return is to be filed for every financial year (covering period 1st April to 31st March) in Form FC-4 electronically through your login id on https://fcraonline.nic.in

The return should be uploaded within a period of nine months from the closure of the year i.e., by 31st December each year.

If there is no receipt/utilization of foreign contribution during the year, it is mandatory to submit a 'NIL' return under the act.

Online filing with uploading of pdf scanned copies of the relevant documents with scanned signature and stamp of chief functionary is mandatory.

Every organization receiving foreign contributions is required to furnish a certificate from a Chartered Accountant. The preform of the certificate to be given by the chartered accountant is provided in Form FC-4.

The Chartered Accountant is required to certify the following:

1. The brought forward balance of the foreign contribution at the beginning of the year.
2. The foreign contribution received during the year
3. The unutilized balance of foreign contribution at the end of the year
4. Certify that the NPO has maintained the account of foreign contribution and records relating thereto in the manner specified in the Foreign Contribution (Regulation) Act, 2010.
5. The information furnished in the certificate and in the enclosed balance sheet, income & expenditure statement and statement of receipt and payment are correct.

Delay in Filing Form FC-4 Annual Return:

The delay in filing of Annual return is an offence and attracts penalty of Rs. 1,00,000/- or 5% of the foreign contribution received during the period of non-submission, whichever is higher.

Such penalty can be paid on the FCRA portal while filing the delayed returns.

Darpan ID:

The NGO DARPAN is maintained by NITI Aayog.

This portal enables NPOs to enroll centrally and thus facilitates creation of information about NPOs, Sector/State wise.

The Portal facilitates NPOs to obtain a system generated Unique ID. The Unique ID also known as Darpan ID is mandatory to apply for grants under various schemes.

Restriction On Transfer & Utilization of Funds:

Transfer:

1. As per FCRA Act, the person who is registered and granted a certificate or has obtained prior permission under this Act; and receives any foreign contribution, shall not transfer such foreign contribution to any other person.
2. It will not be possible for one NPO to transfer funds to another NPO, whether registered under FCRA or not.

Utilization:

1. If the Central Government, on the basis of any information or report, and after holding a summary inquiry, has reason to believe that a person who has been granted prior permission has contravened any of the provisions of this Act, it may, pending any further inquiry, direct that such person shall not utilize the unutilized foreign contribution or receive the remaining portion of foreign contribution which has not been received or, as the case may be, any additional foreign contribution, without prior approval of the Central Government.

Intimation Of Quarterly Receipts of Foreign Contribution:

On quarterly basis all NPO who have been granted registration or prior permission shall submit quarterly receipts of foreign contribution intimation indicating the details of donor, amount received and date of receipt, on its official website.

The information should be uploaded within 15 days following the last day of the quarter in which the funds were received.

Intimation of Change in name / address FC-6A:

To change name / address of the NPO intimation is to be given online in Form FC-6A within 45 days.

Intimation of Change of nature, aims and objects and registration with local/relevant authorities in respect of the association FC-6B:

For Change of nature, aims and objects and registration with local/relevant authorities in respect of the association, intimation is to be given online in Form FC-6B within 45 days.

Intimation of change in FCRA designated bank account FC-6C:

To change Bank account an intimation is to be given online in Form FC-6C within 45 days.

Intimation of opening of FCRA utilization account FC-6D:

Transfer of funds is allowed from the designated foreign contribution account of an Association to the multiple account or accounts opened for its utilization, which is referred as Utilization account.

For opening FCRA utilization account, intimation is to be given online in form FC-6D within 45 days from the date of opening an FCRA utilization bank account.

Intimation of change in board members FC-6E:

For change in Board members of the association, intimation is to be given online in Form FC-6E within 45 days.

Cancellation of Registration:

The central government has the power to cancel the registration certificate.

After making a required inquiry, the government passes the order for cancelation.

Once the registration is cancelled, an NPO shall need to register a fresh application and shall not be eligible for registration or prior permission for the period of three years from the date of cancellation of such certificates.

Grounds for cancellation:

1. Violation of any terms & condition of the certificates
2. Using foreign donation for administrative purpose.
3. NPO’s not engages in the activities mention in MOA/Deed
4. Making false statement, declaration or false documentation.
5. Non-compliance of annual return
6. In opinion of government, that’s it’s in the public interest to cancel the registration.
7. No order of cancellation of certificate under this section is made unless the person concerned has been given a reasonable opportunity of being heard.

Suspension Of Registration:

If the Central Government, has reasons recorded in writing, and is satisfied that the pending question of cancelling the certificate on any of the grounds of cancellation, it is necessary to do so, it may, by order in writing, suspend the certificate.

As per the FCRA Act, the government has the power to suspend the registration certificate for up to 360 days.

Any NPO whose certificate is suspended, cannot receive any foreign contribution or utilize any foreign contribution already in his custody until prior approval of Central Government.

Surrender Of Registration Section 14A:

On a request being made, the central Government may permit to a person to surrender their registration certificate.

The central Government may grant such permission if, post an inquiry, it is satisfied that such person has not contravened any provisions of the Act, and the management of its foreign contribution and assets if any, created out of such contribution has been vested in an authority prescribed by the Government.

GST (Goods and Services Tax) - Knowledge Primer

1. What is GST?
   • GST stands for Goods and Services Tax.
   • GST is a consumption-based tax charged on goods and services.
   • The tax is designed in such a way that the final consumer of the goods and/or services has to bear it.
   • It is an indirect tax that has replaced many other indirect taxes in India, such as excise duty, VAT, and services tax.
   • GST has been in force from 1st July, 2017 based on the Goods and Service Tax Act passed by the Indian Parliament on March 29, 2017.

For example:

1. Under the old tax system, if a product is being sold from Mumbai to Chennai at a price of Rs. 2100, you must pay CST (Central State Tax) of 10% which is Rs. 210. So, the total cost becomes Rs. 2310.

   Under GST, you will only have to pay IGST (Integrated Goods and Service Tax) of 10% as the cost of CGST (Central goods and service tax) and SGST (State Goods and Service Tax) will be deducted from the integrated tax. The CGST and SGST comprises of 5% tax. So, for the above-mentioned scenario, the total cost from Mumbai to Chennai will only be Rs. 2210 and you save Rs. 100.

1. The following taxes are subsumed and do not exist separately because of the introduction of GST:
   • CENTRAL TAXES:
   • State Taxes:
   • Central Excise Duty.
   • The Excise Duty.
   • Additional Duties of Excise (goods of special importance).
   • Additional Duties of Excise (textile and textile products).
   • Service Tax.
   • Additional Customs Duty.
   • Special Additional Duty of Customs.
   • Central Surcharges and Cesses.
   • Value Added Tax.
   • Central Sales Tax.
   • Entry Tax, Octroi and LBT (Local Body Tax).
   • Luxury Tax.
   • Taxes on Advertisements.
   • Taxes on Lottery, Betting and Gambling.
   • Entertainment Tax.
   • Purchase Tax.
   • State Cesses and Surcharges.

The following sectors are excluded from GST:

1. Basic Custom Duty
2. Tobacco Products (partly)
3. Electricity and Power
4. Real Estate Stamp Duty
5. Clean Energy Cess
6. Alcohol for human consumption

India's GST is a dual system consisting of two components:

1. Central Goods and Services Tax (CGST): Levied by the Central Government on intra-state supplies of goods and services.
2. State Goods and Services Tax (SGST): Levied by the State Governments on intra-state supplies of goods and services.

CGST and SGST are not applicable for: a) the exempted goods and services, b) transactions that fall below the set threshold limitations, and, c) items that are not subject to GST.

Integrated Goods and Services Tax (IGST):

• For inter-state supplies and imports, Integrated GST (IGST) is levied by the Central Government. The tax revenue is then shared between the Central and State Governments.

GST Rates:

• GST rates in India are categorized into multiple slabs: 5%, 12%, 18%, and 28%. Certain essential goods, such as food grains, have a zero-tax rate. Some goods and services, like petroleum products and alcohol for human consumption, are temporarily kept outside the purview of GST.

GST for NPOs (Non-Profit Organizations) in India:

• GST Registration:
• Taxability of Non-profit making organizations is decided based on the kind of goods and services, such entities undertake.
• GST can be applicable to some services and goods provided by charitable trusts or non-profit organizations.
• Legally GST registration is required for an NPO in India, unless they have an exemption.

According to GST rules, the following services provided by charity trusts and NGOs are exempt from GST:

1. Services offered by a company that have been authorized by the Income Tax Act of 1961’s section 12AA.
2. Activities promoting education, public health, sanitation, or any other service to the general public.
3. Services rendered to the UN (United Nations) or any other international body.
4. Services offered in the form of instruction or coaching in leisure activities related to the arts, cultures, or sports.

An organization with annual revenue of more than Rs 50 lakh (approx. $7 million), must register for GST.

Voluntary GST Registration:

• Any person or entity that wishes to supply goods or services can obtain GST registration voluntarily, irrespective of business turnover.
• Voluntarily obtaining GST registration can help the business avail Input Tax Credit and also provide GST bill to customers.

Taxable person under GST:

• A 'taxable person' under the GST Act is someone who conducts business in India and is registered or needs to be registered under the GST Act.
• A taxable person can be an individual, HUF (Hindu Undivided Family), company, firm, LLP (Limited Liability Partnership), an AOP (association of persons) / BOI (body of individuals), any corporation or Government company, body corporate incorporated under the laws of a foreign country, co-operative societies, local authorities, governments, trusts, or artificial juridical persons.

Threshold Limit for Registration:

• Every supplier must register with the state if his/her aggregate turnover in a financial year exceeds a certain threshold limit based upon the state’s category:
• Special States of Assam, J&K (Jammu & Kashmir), Andhra Pradesh, Himachal Pradesh, Sikkim, Meghalaya, Mizoram, Nagaland, Tripura and Uttarakhand – Rs. 10 lakhs.
• All other states – Rs. 20 lakhs.
• If a person is engaged in the business of supplying non-taxable supplies, or wholly exempt supplies, the person is not liable to register.

What is GSTIN?

• GSTIN or Goods and Services Tax Identification Number (GSTIN) is provided to entities having a GST registration number.
• GSTIN is 15 characters in length.
• The allocation of GSTIN is based on PAN (Permanent Account Number) and State of the applicant.
• In a GST registration number, the first two digits represent the State Code and the following next 10 digits represent the PAN of the applicant.

Input Tax Credit (ITC):

• Registered businesses can claim Input Tax Credit for the GST paid on purchases.
• This credit can be utilized to offset the GST liability on sales. However, certain conditions must be met for claiming ITC.
• As CGST & SGST are treated separately taxes paid against the CGST shall be permitted to be claimed as input tax credit (ITC) for CGST and could be utilized only against CGST Payments. The same principle applies for SGST as well.

Reverse Charge Mechanism:

• Under this mechanism, the recipient of goods or services is liable to pay GST instead of the supplier.
• This is applicable in specific scenarios, like when unregistered suppliers provide goods or services to registered recipients.

What is E-way Bill?

• For the movement of goods above a certain value, an E-way bill must be generated electronically. It ensures better monitoring of goods in transit and helps prevent tax evasion.
• It is a permit needed for inter-state and intra-state transportation of goods worth more than Rs. 50,000.
• It contains details of the goods, the consignor, the recipient, and the transporter.
• It can be electronically generated through the GSTN.

Filing of Returns:

• Organizations need to file GST returns regularly, providing details of sales and purchases. There are various forms for different types of transactions, and returns can be filed online.

Some of the important forms are mentioned below:

What is GSTR 1?

• The Goods and Services Tax Return 1 is a document that each registered tax payer needs to file every month/quarter.
• It must contain the details of all sales and supply of goods and services made by the tax payer during the tax period.
• However, this return is not applicable to composition vendors, non-resident foreign taxpayers and those with a Unique Identification Number.

What is GSTR-3B?

• Form GSTR-3B is a simplified summary return and the purpose of the return is for taxpayers to declare their summary GST liabilities for a particular tax period and discharge these liabilities.
• A normal taxpayer is required to file Form GSTR-3B returns for every tax period.

What is the CMP-08 form?

• The Form CMP-08, is a special statement-cum-challan. A composition dealer uses Form CMP-08 to declare the specifics or a summary of the self-assessed tax that is due for a particular quarter. It serves as a challan for tax payments as well.

Composition Scheme:

• Small taxpayers with a turnover below a specified limit can opt for the Composition Scheme. Under this scheme, they pay a fixed percentage of their turnover as GST and are relieved from some compliance requirements.
• A trader who has registered under the composition scheme established for both the delivery of products and services is referred to as a composition dealer. By the 30th of April of a particular fiscal year, composition dealer must additionally submit Form GSTR-4, in its updated format, along with Form CMP-08.

What is GSTR 7?

• GSTR-7 is a monthly return filed by individuals who deduct tax at source or TDS under the Goods and Services Tax (GST).
• Every GST registered individual who deducts TDS under GST must file in Form GSTR-7 by the 10th of the next month.
• The form contains details of TDS deducted, TDS payable, TDS refund, etc.

What is Form GSTR-9?

• Form GSTR-9 is an annual return to be filed once for each financial year, by the registered taxpayers who were regular taxpayers, including SEZ (Special Economic Zones) units and SEZ developers.
• A special economic zone (SEZ) is a dedicated zone wherein businesses enjoy simpler tax and easier legal compliances.
• The taxpayers are required to furnish details of purchases, sales, input tax credit or refund claimed or demand created etc.

What is Form DRC-03 under GSTR 9?

• DRC-03 is a form used to file voluntary tax payments as defined by the GST law of the country.
• It is done when the government discovers a demand or deficiency of taxation after the deadline for filing tax returns for a financial year has passed.
• DRC full form under GST is 'Demand and Recovery Forms'.

What is UDIN?

• It is a unique 18-digit number generated for a document certified or signed by a practicing-chartered accountant. UDIN full form is a Unique Document Identification Number.
• Chartered accountants must compulsorily register themselves on this portal to generate the Unique Document Identification Number.

Filing Letter of Undertaking (LUT) in GST:

• What does LUT under GST mean – LUT means Letter of Undertaking. It is prescribed to be furnished in the form GST RFD 11 under rule 96 A, whereby the exporter declares that he or she will fulfil all the requirement that is prescribed under GST while exporting goods and services without making the payment of GST.

What is GSTR-10?

• A taxable person whose GST registration is cancelled or surrendered must file a return in Form GSTR-10 called as Final Return.
• This is statement of stocks held by such taxpayer on day immediately preceding the date from which cancellation is made effective.
• This return is intended to provide details of ITC involved in closing stock (including inputs and capital goods) to be reversed/ paid by the taxpayer.

Form GST REG-16?

• A taxpayer that had earlier registered for the Goods and Services Tax (GST) and now wishes to cancel his registration can do so by filing the GST registration cancellation application in Form GST REG-16.
• In the Application for Cancellation of Registration, if any amount were paid at the time of filing application for cancellation of registration (Form REG-16), then such amount will be reduced from your liability to be payable at the time of filing of Final Return (FORM GSTR-10) and will be displayed in Table 9 & 10 (Amount of tax payable and paid).

Types of Payments under GST available through Online Facility:

• Net Banking: The screen directs the taxpayer to the Net Banking page of the selected bank. The amount that has to be paid is displayed on the screen. If the taxpayer wants to change the amount, he/she has to abort the transaction and then has to create a new challan. For successful payment, the taxpayer is re-directed to the GST Portal where the transaction status is displayed.
• Over the Counter: The taxpayer has to take a print out of the challan and then approach the selected bank. The payment can be done using cash/ cheque/ (DD) Demand Draft. After confirmation from the bank, the payment status is updated on the GST Portal.
• NEFT/ RTGS: The taxpayer has to take a print out of the challan and then approach the selected bank. Mandate form is simultaneously generated. The taxpayer has to pay using Cheque or can pay via the account debit facility. The bank carries out the transaction and the RBI shall confirm the payment within 2 hours. After confirmation, the GST portal updates the status on the portal. (NEFT – National Electronic Funds Transfer, RTGS – Real Time Gross Settlement).

What is an authorized signatory under GST?

• An authorized signatory refers to a person who is authorized by the taxpayer to perform activities on the GST portal on his behalf.
• Following are the points to consider when appointing an Authorized Signatory:
• Authorized signatory cannot himself appoint another authorized signatory.
• Authorized signatory can perform all the activities except changing of principal place of business and core field.

Income Tax – Frequently Asked Questions (FAQs)

• What are the Types of Incomes that can be claimed as exemptions?
  Income received or derived from property held by charitable trust or societies utilized by them for charitable purposes is exempt from taxation under certain conditions.
• Which types of Charitable donation are eligible for deduction under section 80G?
  Not all charitable donations are eligible for deductions under Section 80G. The Indian government maintains a list of approved institutions and funds that qualify for such deductions. Taxpayers should ensure that the organization they are donating to is registered under this section and is eligible for the tax benefit.
• What are the benefits of the 80G Certificate for NGOs?
  
  • A donor can avail of a deduction from their taxable income.
  • Attracts the donor to donate.
  • Getting an 80G Registration also facilitates seeking foreign contributions.
  • Only an NGO with 12A and 80G registration is eligible for government funding.
  • As a society by law, 80G registration gives NPO a promising prospect, enhancing its goodwill and the confidence of those associated with the brand.
• What are the details required related to Asset & Liabilities while filing the Form 10A?
  
  • Corpus
  • Reserve/Surplus other than corpus
  • Long Term Liabilities
  • Other Liabilities
  • Land & Building
  • Other Fixed Assets
  • Investment/deposits made in one or more of the forms
  • Investment/deposits other than mentioned
  • Other Assets
• ...