Firstly, we need to understand what is acharitable entity.
A charitable entity is an entity whose activities falls under the “Charitable purpose” as defined under Section 2(15) of the Income Tax Act. Activities included under section 2(15) are: –
(a) relief of the poor, (b) education, (c) Yoga (d) medical relief, (e) preservation of environment (including water sheds, forests and wild life) f) preservation of monuments or places or objects of artistic or historic interest and (g) advancement of any other object of public utility
Benefits of a Charitable Entity:
Tax Benefits: Charitable entities are eligible for tax exemptions under certain conditions, depending on the purpose and activities of the trust. For example, charitable entity created for charitable purposes are eligible for tax exemptions under section 11 of the Income Tax Act, of 1961.
Public Support: Charitable entities often attract public support and goodwill as they are perceived to be working for the betterment of society. This can lead to increased donations, grants, and support from individuals, corporations, and government agencies.
Access to Funding: Charitable entities have access to various sources of funding, including government grants, philanthropic donations, and corporate sponsorships, which can aid in carrying out their charitable activities.
Mission-Driven Focus: As a charitable entity, the organization’s primary focus is on fulfilling its charitable objectives rather than solely maximizing profits. This mission-driven approach attract employees and volunteers who are passionate about the cause.
Disadvantages of a Charitable Entity:
Reporting and Compliance: Charitable entities are required to meet specific reporting and compliance requirements to maintain their charitable status like renew their 12A registration certificate in every 5 years. Failure to do so could result in the loss of tax benefits and even legal consequences.
Expenses allowed on payment basis only: Any sum payable by any trust or institution shall be considered as application of income in the previous year in which such sum is actually paid by it which are allowed on payment basis only.
Restricted Activities: Charitable entities are usually subject to legal restrictions on the types of activities they can engage in. They must demonstrate that their activities align with their stated charitable purpose, which may limit their scope of operations.
Governance and Accountability: Charitable entities must adhere to strict governance and accountability standards. They may be required to have a board of directors, maintain transparency in financial matters, and follow specific guidelines to ensure proper use of funds.
Limited Profit Distribution: Unlike commercial entities where profits can be distributed to shareholders, charitable entities are generally prohibited from distributing profits to individuals. Any surplus generated must be reinvested into furthering the charitable purpose.
Title: Understanding MGT-14 Form: Filing Introduction: MGT-14 is a vital form under the Companies Act, 2013, which serves as a means for companies to seek approval for certain key corporate actions. This article aims to provide a comprehensive overview of MGT-14, its filing process, and shed light on the requirement of eAoA (electronic Articles of Association) while filing.
What is MGT-14?
MGT-14 is a form prescribed by the Ministry of Corporate Affairs (MCA) in India, which facilitates the filing of resolutions and agreements to seek the approval of the Registrar of Companies (RoC) for specific corporate actions. It is governed by Section 117 of the Companies Act, 2013, and is an essential compliance requirement for companies.
Filing Process for MGT-14:
The filing process for MGT-14 involves the following steps: a. Resolution or Agreement: The company must first pass a resolution or execute an agreement, depending on the nature of the proposed action. This resolution or agreement outlines the details of the action to be taken. b. Preparation of MGT-14 Form: The company must then prepare the MGT-14 form by filling in the necessary information, such as the company’s name, registered office address, CIN (Corporate Identification Number), and details of the proposed action. c. Board Meeting: The board of directors must convene a meeting to approve the resolution or agreement and authorize the filing of MGT-14. The minutes of this board meeting should be prepared and maintained as per legal requirements. d. Digital Signature Certificate (DSC): The MGT-14 form must be digitally signed by a director or company secretary using their valid Digital Signature Certificate (DSC). e. eAoA Requirement: In certain cases, companies are required to submit the electronic Articles of Association (eAoA) along with the MGT-14 form. The eAoA is a digital version of the company’s Articles of Association, which defines its internal regulations and governance framework. f. Uploading and Payment: The completed MGT-14 form, along with any supporting documents, should be uploaded on the MCA21 portal. The requisite filing fees must also be paid online. g. Approval and Compliance: Once the MGT-14 form is filed, the RoC reviews the submission. If everything is in order, the RoC approves the action, and the company must comply with any additional requirements specified by the RoC.
Understanding eAoA:
eAoA refers to the electronic version of a company’s Articles of Association. The Articles of Association is a constitutional document that sets out the rules and regulations governing the internal management and operation of the company. Traditionally, the Articles of Association were in physical form, but with the advent of technology, companies can now maintain an electronic version. The requirement of eAoA while filing MGT-14 arises in cases where there is a change or alteration to the Articles of Association. The eAoA provides a digital record of the modified clauses or provisions, ensuring transparency and ease of access for stakeholders.
Filing MGT-14 in the V3 portal involves a few steps. Here’s a step-by-step guide to help you through the process:
Access the MCA V3 Portal:
Visit the Ministry of Corporate Affairs (MCA) website (www.mca.gov.in) and navigate to the MCA Services tab.
Click on the “Company Forms Download” option and select the “eForms V3” link.
Log in using your credentials (User ID and Password) to access the V3 portal.
Select the MGT-14 Form:
Once logged in, click on the “eForm Upload” option on the left-hand side of the dashboard.
Choose the “Integrated Form for Filing Resolutions and Agreements” category.
Select the MGT-14 form from the list of available forms.
Fill in the MGT-14 Form:
Enter the required details in the MGT-14 form, such as the company’s Corporate Identification Number (CIN), the purpose of filing, the proposed resolution or agreement, and other relevant information as per the form’s instructions.
Ensure that the information provided is accurate and complete.
Attach Supporting Documents:
Depending on the nature of the resolution or agreement being filed, you may need to attach supporting documents.
Examples of such documents include the board resolution, shareholders’ agreement, special resolution, or any other documents required for the specific filing.
Prepare the eAoA (if required):
If there are changes or alterations to the Articles of Association (AoA), you may need to prepare the electronic Articles of Association (eAoA).
Ensure that the eAoA accurately reflects the modified clauses or provisions.
Digitally Sign the Form:
The MGT-14 form must be digitally signed by a director or company secretary using their valid Digital Signature Certificate (DSC).
Make sure you have the necessary DSC available for the signing process.
Upload the Form and Pay Fees:
Once the form is digitally signed, click on the “Upload eForm” button to upload the MGT-14 form and any supporting documents.
Pay the requisite filing fees online, as applicable.
Review and Submit:
Before final submission, review all the entered details and attached documents to ensure accuracy.
Once satisfied, click on the “Submit” button to complete the filing process.
Await RoC Approval:
After submission, the Registrar of Companies (RoC) will review the MGT-14 filing.
If all requirements are met and there are no discrepancies, the RoC will approve the filing and provide an acknowledgment or approval letter.
Compliance and Record Maintenance:
Once the RoC approves the filing, ensure compliance with any additional requirements specified by the RoC.
Maintain a copy of the filed MGT-14 form, supporting documents, and any related communications for record-keeping purposes. Note: The above steps provide a general guideline for filing MGT-14 in the V3 portal. However, it is recommended to refer to the latest guidelines, instructions, and FAQs available on the MCA website or consult a legal professional for precise guidance based on your specific circumstances.
Conclusion: MGT-14 plays a crucial role in ensuring compliance with the Companies Act, 2013, for specific corporate actions. Understanding the filing process and the requirement of eAoA is essential for companies seeking approval from the RoC. By adhering to the prescribed procedures and providing accurate information, companies can navigate the MGT-14 filing process smoothly and remain compliant with the applicable legal requirements.
Form 10B is a report that needs to be filed by charitable organizations under section 12A(1)(b) of the Income Tax Act, 1961. This form requires the auditor of the charitable organization to provide an audit report of the organization’s accounts and provide an opinion on whether the organization has applied its income and accumulated funds for charitable purposes.
In 2020, the Central Board of Direct Taxes (CBDT) introduced changes to the format of Form 10B. The key changes are as follows:
1. Additional disclosures: The revised Form 10B requires additional disclosures on the activities of the charitable organization, such as the number of beneficiaries, the nature of activities, the funds allocated to specific activities, and the impact of these activities on the beneficiaries.
2. Changes in format: The revised Form 10B has a new format, with a separate section for the auditor’s opinion on whether the organization has applied its income and accumulated funds for charitable purposes. The format also includes separate sections for the auditor’s report on the organization’s financial statements and the notes to the financial statements.
The changes in Form 10B have been introduced to enhance transparency, accountability, and compliance among charitable organizations. The additional disclosures and the new format will help the authorities and the public gain a better understanding of the activities and impact of the charitable organizations.
It is advisable for charitable organizations to seek the assistance of a qualified auditor and ensure compliance with the revised Form 10B. Non-compliance can result in penalties and affect the organization’s eligibility for tax exemptions under section 11 & 12of the Income Tax Act, 1961.
The audit report for charitable organizations in India has undergone some changes in recent years to ensure more transparency, accountability and consistency. The important forms that is used in the audit report of charitable organizationregistered u/s 12A is Form 10B.
Form 10B:
Form 10B is used for audit report of charitable trusts and institutions under section 12A(1)(b) of the Income Tax Act, 1961. The recent changes in Form 10B are as follows:
1. Disclosure of PAN and Aadhaar number: The auditor is required to disclose the Permanent Account Number (PAN) and Aadhaar number of the trustees of the trust or institution being audited in Form 10B.
2. Details of receipts and payments: The auditor needs to provide details of receipts and payments during the financial year under audit. This includes income received from donations, grants, investments, and any other sources, as well as details of expenses incurred.
3. Details of investments: The auditor needs to disclose details of all investments made by the trust or institution, including the nature of the investment, and the amount invested, .
4. Compliance with laws: The auditor needs to state whether the trust or institution has complied with all the laws applicable to it during the financial year under audit, including the Income Tax Act, 1961, and the Foreign Contribution Regulation Act, 2010.
5. Details of loans and advances: The auditor needs to disclose details of all loans and advances given by the trust or institution during the financial year under audit, including the amount, the interest rate, and the terms and conditions.
In summary, the recent changes in Form 10B has increased the level of transparency and accountability for charitable organizations in India. These changes have helped to ensure that charitable organizations are using their funds in a responsible manner and are complying with all the laws applicable to them.
The few common questions pertaining to form 10B :
Q1) how is form 10B to be dealt with in terms of receipts ?
The 10B form is used for filing the Audit Report of an organization registered under section 12A of the Income Tax Act 1961.. The new rules and regulations for organizations would primarily pertain to the following:
1. Tax Audit: Under the Income Tax Act, organizations whose gross receipts exceeds the basic exemption limit in a financial year are required to get their accounts audited by a Chartered Accountant and get it filed online by the 30thSeptember of following year.
2. Filing of Income TaxReturn: Charitable organizations whose gross receipts exceeds the basic exemption limit in a financial year are required to file Income Tax Return in the prescribed form .. The due date for filing the Income TaxReturn is October 31st of the following year.
3. Compliance with TDS and TCS provisions: Organizations are required to comply with the provisions of Tax Deducted at Source (TDS) and Tax Collected at Source (TCS). This would include deducting TDS on payments made to vendors, deducting TDS on salary payments, collecting TCS on sales, etc. The TDS and TCS returns need to be filed in the prescribed format.
4. Compliance with GST provisions: If the organization is registered under the Goods and Services Tax (GST), they would need to comply with the provisions of GST. This would include filing GST returns, paying GST on time, etc.
5. Compliance with other laws and regulations: Organizations would also need to comply with other laws and regulations that are applicable to them. For example, if the organization employs more than a certain number of employees, they would need to comply with the provisions of the Employees Provident Fund (EPF) and Employees State Insurance (ESI) Acts.
It is important for organizations to comply with the above rules and regulations to avoid penalties and interest charges. It is recommended to seek the advice of a Chartered Accountant or Tax Consultant for proper compliance.
Q2) Foreign contributions received by an organization need to be reported in the Annual Return filed in Form 10B under the Income Tax Act. Here are the steps to deal with foreign contributions in Form 10B:
1. Identify the nature of the foreign contribution: The foreign contribution could be in the form of donations, grants, aid, technical collaboration, etc. The nature of the contribution needs to be identified as it will determine how it needs to be reported in Form 10B.
2. Check the eligibility to receive foreign contributions: Organizations need to be registered under the Foreign Contribution (Regulation) Act, 2010 (FCRA) to receive foreign contributions. If the organization is not registered under FCRA, it cannot receive foreign contributions.
3. Report foreign contributions in Part B of Form 10B: The foreign contributions received by the organization need to be reported in Part B of Form 10B. The contributions need to be classified as either “utilized for charitable purposes” or “not utilized for charitable purposes”. If the contribution has not been utilized for charitable purposes, it needs to be carried forward to the next financial year.
4. Disclose the details of foreign contributions: The auditor of the Organizations need to disclose the details of foreign contributions received during the financial year in Form 10B. This would include the name of the foreign donor, the amount of the contribution, the purpose of the contribution, etc.
5. Verify the compliance with FCRA: Organizations need to ensure that they are in compliance with the provisions of the FCRA while receiving and utilizing foreign contributions. Non-compliance with FCRA provisions could result in penalties and legal action.
It is important for organizations to get foreign contributions properly reported in Form 10B and comply with the provisions of FCRA to avoid any legal issues. It is recommended to seek the advice of a Chartered Accountant or Tax Consultant for proper compliance.
The Partnership Firm was established by Late Shri K.K.Khanna in 1970. He had a vast experience in diverse spheres of audit and taxation. Mr. Sameep Khanna and Mrs. Ashima Khanna joined him as partners in 2002. Late Shri K.K.Khanna expired in the month of December, 2020 due to a sudden cardiac failure.
