Some NGOs conduct research studies, help in group formation or provide various other development support to Government Departments or donor agencies. CSR work is also an emerging category.
The payment is mostly treated as grant or donation by the NGO. However, in some cases, the donor agency or Government deducts tax at source. This might be done u/s 194C (1%) or 194J (10%). Though NGOs don’t like this, they often have to accept it. In any case, they can later claim a refund of the tax amount.
But now there is a new problem. The Income Tax Department is providing a list of such cases to Service Tax officers. They scrutinise the TDS amount u/s 194J. If it is high (say Rs. 1 lakh), then they check whether the NGO is registered under service tax. If not, they will pay a visit and issue a demand note.
So if you are one of these NGOs, be prepared for a visit from the Service Tax Department!
References:
1. Sec. 194(J) of Income Tax Act, 1961
(16-May-2014)
