Non-Governmental Organisations (NGOs) are non-profit entities that function independently of government control, though they may receive substantial…

Non-Governmental Organisations (NGOs) are non-profit entities that function independently of government control, though they may receive substantial government funding. They play a vital role in tackling social and environmental challenges by advocating for a policy change, raising awareness, delivering essential services, and promoting community development. Acting as a bridge between the government and the public, NGOs help to identify critical issues and drive effective, sustainable solutions. Our country has a rich tradition of civil society movements, with organization actively engaged in diverse areas such as health, education, community development, environmental protection, sanitation, access to clean drinking water, and poverty alleviation. The country is estimated to have around 32 lakh NGOs, which operate in the form of trusts, societies, and Section 8 companies. Many States and Central Government agencies have regulatory over these non-for-profit entities. Non-Governmental Organisations (NGOs) in India operate independently of the State and are governed by a board of trustees who serve in a fiduciary capacity. These organizations exist to generate benefits for society rather than for personal gain, as they are prohibited from distributing any monetary surplus among their members. NGOs raise funds through multiple sources, including online platforms, fundraising events, government grants, corporate partnerships, and international agencies. To maintain public trust and credibility, they uphold strong accountability mechanisms such as financial transparency, periodic reporting, and impact assessment. For legal operation and eligibility for tax exemptions, NGOs in India must be registered under the Societies Registration Act, 1860 or Public Trust Act as applicable at the state level and obtain registration under Section 12AB of the Income Tax Act, 1961. Furthermore, organizations seeking to receive foreign contributions, whether from international agencies or Non-Resident Indians, are required to secure registration under the Foreign Contribution (Regulation) Act, 2010. EarthCare Health Trust (EHT) a Non-Governmental Organisation (NGO) is committed for providing essential medical services and promoting environmental sustainability across India. Its primary objective is to ensure that underprivileged communities have access to basic healthcare facilities, such as free eye camps and medical check-ups, while fostering a clean and green living environment for all. The organisation mobilises resources primarily through local donors, state government grants, and foreign contributions. During the financial year 2024-25, EarthCare Health Trust spearheaded a variety of initiatives focused on healthcare and environmental sustainability, demonstrating its commitment to the well-being of communities and the preservation of the environment. In the city and surrounding villages, EHT has conducted 50 cleanliness campaigns, supported by the distribution of segregated dustbins. A total of 2,500 coloured dustbins with twin colours of green and blue, costing - 400 (MRP:700) each have been distributed free of cost to encourage residents to separate domestic waste effectively. These initiatives have made waste recycling easier while promoting active community participation in maintaining hygiene and sanitation. Tree plantation drives were conducted in three cities with planting of 12,000 trees at a well-managed cost. Trust spent 5 lakh on the purchase of saplings. The Trust also conducted organized awareness drives, spending 3 lakh on various programs aimed at educating the local community on waste management techniques and promoting a green environment. During the year 2024-25, the Trust purchased and installed solar panels and lighting systems in the hospital and other buildings at a 25% reduced installation cost. Local government survey at the end of the year, reported a noticeable reduction in litter and an increase in vegetation cover in the areas where the campaigns were implemented. Trust organized 60 free medical check-up camps and eye care camps, facilitated by a local team of doctors who were provided honorariums for their services. Through these initiatives, 2,560 eye surgery were successfully conducted in the Trust-owned hospital, providing critical care to underserved populations. The hospital is equipped with state-of-the-art machines and medical equipment. Trust implemented a cost-effective healthcare delivery model that helped keep medical service costs low. Additionally, it negotiated discounted rates with suppliers of medical equipment and materials, further reducing operating expenses. The introduction of a digital medical records system also minimized paperwork and administrative costs. During the financial year 2024-25, it imported latest medical equipment (first of its kind in India) worth 75 lakh specifically for performing eye surgeries. The Trust provides each of the five doctors, who consistently dedicate their time to the Trust-owned hospital and actively contribute to enhancing healthcare services, with an annual honorarium of 4.50 lakh each, in addition to reimbursement for eye surgery charges. It implements sliding-scale fees to ensure healthcare remains accessible to patients from all economic backgrounds and conducts outreach programs in underserved areas to extend its services to communities with limited access to medical care. Hospital charges a nominal fee from the patients for services to cover basic operational costs but continue offering free care to those who cannot pay at all. It served more than 22,000 patients during the year. It also organized a range of preventive healthcare programs aimed at reducing the incidence of diseases. The hospital has outsourced its security and cleaning services to external agencies in March 2025, paying - 7.50 lakh p.a. to ABC Security Services Pvt. Ltd. and 6 lakh p.a. to Purecare Services Co., a partnership firm respectively. EarthCare Health Trust has been registered under the Income-tax Act, 1961 since 01.04.2012 and registered under section 12AB w.e.f. 1st April, 2021 and under the Foreign Contribution (Regulation) Act, 2010 with effect from 1st August 2021. EHT is not registered under CGST Act, 2017. The annual return in form FC-4, certified by a CA. Amit, who is not a statutory Auditor, for the financial year ending 31st March 2024 was filed on 15th January 2025. Trust owns three buildings, of which one was constructed in December 2023, comprising two community halls having capacity of 120 persons and three community halls, each with a capacity of 50 persons. Trust intends to use the newly constructed buildings for hosting yoga and meditation camps, and other related activities. For this daily rent of 5,000 will be charged. Rental income from organising Yoga and meditation camps, renting of community halls to external parties is to be used for the main objectives of the trust. On 30th April 2025, the office bearers of the Trust convened a meeting to deliberate on the implications of the recent amendments to the FCRA Act and Rules and the Income-tax Act, 1961, and to evaluate the applicability of the provisions of CGST Act 2017 to the Trust. The meeting was attended by CA. Puneet, who has been appointed as an auditor of the trust for the financial year 2024-25. They sought information from CA. Puneet regarding the recent amendments to the FCRA regulations, the Income Tax provisions related to renewal of registration, and the changes in GST provisions applicable to trusts. He was informed of the committee's decision to raise funds by renting out conference and community halls and was asked whether these rental services are exempt for the trust under GST or if GST registration is necessary. The Chairman of the trust asked CA. Puneet to suggest a method for evaluating the effectiveness of the trust's various initiatives undertaken during the year. CA. Puneet recommended that a Value for Money (VFM) framework would be the most suitable approach to assess the trust's performance. One of the office bearers, Mr. Raman enquired whether, EHT can donate any funds to another charitable trust registered under section 12AB and whether it will be treated as application of income of the trust. He further informed that during the financial year 2024-25, the Trust received foreign contributions amounting to 75 lakh from foreign agencies and Non-Resident Indians, designated for various healthcare and environmental initiatives undertaken by the Trust. The said funds were received in 'FCRA Account' maintained with authorised branch of State Bank of India. Out of the total foreign contributions received, 55 lakh was utilized for healthcare and environmental initiatives undertaken during the year and in addition, administrative expenses incurred amounted to 12 lakh. Planned expenditure of 3 lakh on fire safety system upgrade and administrative office maintenance could not be spent due to unavailability of vendor in March 2025 and will be incurred in May 2025. EHT accounts department however did not maintain separate records for either the receipt or the utilisation of the same. Trust is also maintaining two accounts with other branches of State Bank of India for the purpose of utilizing the foreign contribution which has been received from 'FCRA Account' mentioned above. Trust is maintaining separate bank accounts for receiving donations and contributions from persons in India. The accountant of the trust has provided the following summarized financial information for the financial year 2024-25: Income Amount (in lakhs) State Govt. Grant received for eye surgeries during the year 2024-25 40 Voluntary contribution received not forming part of the corpus (including foreign contribution) 190 Voluntary contribution received not forming part of the corpus (names, addresses and PAN of donors not available) 15 Net income from property held under trust 8 Corpus donations received (names, addresses and PAN of donors are available) 10 Corpus donations received (names, addresses and PAN of donors are not available) 2 Amount applied for the objectives of the trust 213 After calculating the surplus, trustees decided to invest 15% of the income in bonds u/s 11(5) of the Income-tax Act, 1961. For this Bonds of three approved financial corporations were identified and discussed. The following further information is available in respect of three bonds: Maturity (Years) Coupon Rate (%) Yield to Maturity (%) Currently Trading at Bond 1 2 8 8.25 Premium Bond 2 5 7 7.85 Discount Bond 3 6 6 7.00 Discount An income tax refund of 1 lakh was received on 20th April 2025 in the Trust's non-FCRA bank account. This amount includes - 0.20 lakh pertaining to refund of tax deducted at source (TDS) on interest earned from FCRA-funded fixed deposits. Amount applied for objectives includes amount spent on Healthcare and Environmental Sustainability initiatives undertaken during the year and administrative expenses. At the end of the meeting, CA. Puneet provided a comprehensive overview of FCRA compliance obligations, highlighting the consequences of non-compliance and brief overview of the latest amendments in the law. He also offered detailed clarification regarding the applicability of GST provisions to the trust and procedure relating to renewal of registration under section 12AB of the Income Tax Act, 1961. One of the trustees who regularly travels abroad put a proposal before Board of trustees of EHT to make overseas direct investment in foreign entity. Board has approached different consultants on this matter and could not get clear view on the following: (i) Whether EHT can make investment in a foreign entity (ii) If yes, which will be the appropriate authority for getting the requisite approval, if necessary? (iii) If Trust deed does not have any clause for such investments, whether any amendment to trust deed is required? (iv) Whether foreign entity needs to be engaged in same sector as of EHT? Multiple Choice Questions: [Provide the correct option to the following questions]