Friday, 21 July 2017

Finance Act 2017

The Finance Bill 2017 was approved after modifications by both Houses of Parliament and received the assent of the President of India on 31st March 2017. 


1) Reduction in limit of cash transactions

The limit of cash transaction has been reduced from Rs. 3 lacs to Rs. 2 lacs:

(a) In aggregate from a person in a day;

(b) In respect of a single transaction; or

(c) In respect of transactions relating to one event or occasion from a person.

2) Restriction on inter-charity corpus donations

One charitable organization may contribute funds to another charitable organization, but, not as a corpus donation or grant.

3) Additional conditions for applicability of Section 11 and 12

The Finance Act, 2017 has amended sections 12A and 12AA to impose following additional conditions on organizations registered under section 12AA:

·         To make application to the Commissioner of Income Tax (CIT) within 30 days if there is any change in the objects clause which do not conform to the conditions of registration and have it registered.

·         Mandatory filing of income tax returns within the time allowed under section 139(4A).

4) Restriction on cash donations

Sub-section (5D) of section 80G has been amended to lower the limit on cash donations under section 80G to two thousand rupees only. The move is in consonance with government’s overall efforts to push towards a cashless economy and increase transparency in the system.

5) Expansion of power of survey

Amendment of section 133A has now included the place of ‘activity for charitable purpose’ within the scope of Section 133A. This amendment expressly empowers the income tax authority to enter any places of activity of charitable purpose for inspecting books of accounts, verifying cash, stock or valuable articles or furnishing any relevant information.

The Maternity Benefit (Amendment) Act, 2017

The Maternity Benefit (Amendment) Act, 2017 received the assent of the President of India on 27th March, 2017 and has been published in the Official Gazette.

This law is also applicable to charitable organisations / NGOs registered under the Shops & Establishments Act and employing ten or more employees.


·         Maternity leave has been extended to 26 weeks;

·         Maternity leave of 12 weeks for mother/s who are adopting or commissioning mothers;

·         After availing the maternity leave benefit, an employer may allow a woman to work from home, if the nature of work assigned to her is such that she may work from home;

·         Upon having 50 or more employees, every establishment is required to have the facility of crèche within such distance as may be prescribed, either separately or along with common facilities. The employer is required to allow four visits a day to the crèche by the woman, which will also include the interval for rest allowed to her;

·         Every establishment is required to intimate in writing and electronically to every woman at the time of her initial appointment regarding every benefit available under the Act.

Section 8 Companies Asked to Comply with CSR u/s 135

Section 135 of the Indian Companies Act 2013 requires, every company having Net Worth of Rs. 500/- crore or more, or Turnover of Rs. 1,000/- crore or more, or Net Profit of Rs. 5 crore or more, to constitute a Corporate Social Responsibility (CSR) Committee of the Board and disclose the composition of the CSR Committee in the Board’s Report, formulate a CSR Policy and ensure that the company spends, in every financial year, at last two per cent of the average net profit of the company during the three immediately preceding financial years.

According to the Indian Companies Act 2013, “every company” includes every company registered under this Act, including a Private, Public or Foreign Company or its subsidiary and includes a Company registered u/s 8 (former Section 25) of the Act.

Accordingly, quite a few not-for-profit Section 8 Companies have been served with a Show Cause Notice u/s 134(8) for violation of Section 134(3)(O) read with Section 135 of the Indian Companies Act 2013.

In reality these Section 8 Companies, as per CSR Rules, qualifies as an "implementing agency" for CSR and are eligible as per CSR Rules to receive grants from companies to implement CSR related projects and programs. In fact, the very purpose for which some of these organizations registered u/s 8 of the Companies Act are established and function, are for activities which relate to programs and projects enumerated under Schedule VII.

In our view, the Ministry of Corporate Affairs should study this issue objectively and rationally and review their stand.

Regulating Fundraising by Unregistered Associations & Individuals

Maharashtra State has taken the lead in regulating fundraising activities by unregistered associations and individuals raising funds in the name of religion or charity.

According to reports, Maharashtra state cabinet has approved stringent rules that will make it compulsory for unregistered organizations or even individuals who seek donations to take permission from the assistant or deputy charity commissioner, and require that all such donations and other transactions by such UNREGISTERED BODIES and INDIVIDUALS should be audited by the charity commissioner. In our view such an amendment is appropriate and in fact much needed. Charitable trusts (including societies registered under the Act of 1860) which are already registered with the Charity Commissioner have no reason to feel concerned or uncomfortable.

NGO Not an Industry

Seven years after an NGO employee approached the Labour Court alleging unfair labour practices in the organization, which is run by an ex-MLA (Member of the State Legislative Assembly), the court has dismissed the complaint saying that salaried NGO workers cannot approach Labour Courts.

This order can and should be challenged in a higher court of law. In our view, NGO is an industry if there is a systematic activity, a cooperation between employer and employees and rendering of services which satisfies human wants and wishes. It matters not if the NGO runs solely on grants or donations or whether there is capital, profit or surplus or otherwise. 

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