Is Obtaining PAN of Donors a Necessity?
As a general rule of the
thumb Income tax professionals and practitioners have always suggested that
NGOs should obtain the Permanent Account Number (PAN) of their donors, even if
the donation is made by cheque exceeding Rs. 50,000/-. We agree that there is
no specific mandate under the Income tax Act 1961. However, professionals and
practitioners suggest this as a requirement and arrive at this figure of Rs.
50,000/- based on inference [ITR-7 and Section 13(3)(b)] and practical
experiences (during tax assessment).
Under ITR it is mandatory to provide the PAN in order to cross
verify the information. In the interest of transparency and
identification of donors it is advisable to quote PAN. It may not be
mandatorily enforced but should be implemented voluntarily for self regulation
and governance sake.
Sanjay Mehta
thumb Income tax professionals and practitioners have always suggested that
NGOs should obtain the Permanent Account Number (PAN) of their donors, even if
the donation is made by cheque exceeding Rs. 50,000/-. We agree that there is
no specific mandate under the Income tax Act 1961. However, professionals and
practitioners suggest this as a requirement and arrive at this figure of Rs.
50,000/- based on inference [ITR-7 and Section 13(3)(b)] and practical
experiences (during tax assessment).
Very recently a friendly
debated erupted within the sector whether professionals are putting an
unwarranted compliance burden on NGOs or worse still scaring donors away.
debated erupted within the sector whether professionals are putting an
unwarranted compliance burden on NGOs or worse still scaring donors away.
We
therefore wrote to three Mumbai based Chartered Accountants in this matter in
order to get a sense of what each individual expert felt in this matter or
experiences in actual practice and these were the responses that we received.
We thank each one of them for their insight and input.
therefore wrote to three Mumbai based Chartered Accountants in this matter in
order to get a sense of what each individual expert felt in this matter or
experiences in actual practice and these were the responses that we received.
We thank each one of them for their insight and input.
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The geneses of obtaining PAN
of donors contributing more than Rs. 50,000 has arisen from the
following:
of donors contributing more than Rs. 50,000 has arisen from the
following:
·
Section 13(3)(b) of the Act provides that any person
who has made contribution more than Rs. 50,000 is said to be a person who has
made substantial contribution to the charitable institution.
Section 13(3)(b) of the Act provides that any person
who has made contribution more than Rs. 50,000 is said to be a person who has
made substantial contribution to the charitable institution.
·
Part C of Schedule K of the Income-tax return
form (ITR-7) requires the institution to state name, address and PAN of the
person who has made substantial contribution to the charitable
institution.
Part C of Schedule K of the Income-tax return
form (ITR-7) requires the institution to state name, address and PAN of the
person who has made substantial contribution to the charitable
institution.
Ironically an institution is not obligated
by the Act to obtain donor’s PAN, but, is required to mention PAN in the
income-tax return form which is prescribed under the same Act!
by the Act to obtain donor’s PAN, but, is required to mention PAN in the
income-tax return form which is prescribed under the same Act!
Actually, all that the Act requires a
charitable institution to do is to obtain only the name and address of the
donor. Section 115BBC of the Act dealing with anonymous donation is very clear
on this. Incidentally, sub-section (3) of that section also grants powers to
the government to introduce any other particulars of the donor besides name and
address that a charitable institution will be required to obtain. Presently,
the government has not prescribed any other particulars to be obtained. If the
government intends, it can very well prescribe donor’s PAN as one of the
requirements to be obtained by charitable institutions.
charitable institution to do is to obtain only the name and address of the
donor. Section 115BBC of the Act dealing with anonymous donation is very clear
on this. Incidentally, sub-section (3) of that section also grants powers to
the government to introduce any other particulars of the donor besides name and
address that a charitable institution will be required to obtain. Presently,
the government has not prescribed any other particulars to be obtained. If the
government intends, it can very well prescribe donor’s PAN as one of the
requirements to be obtained by charitable institutions.
We believe it would be a good practice to
obtain donor’s PAN at least for donations above a particular threshold. It just
adds to the optics and creates genuineness about a transaction.
obtain donor’s PAN at least for donations above a particular threshold. It just
adds to the optics and creates genuineness about a transaction.
Milind Gandhi
Gandhi & Associates
Chartered Accountants
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I
have instructed my clients to maintain details for donations of Rs. 10,000/-
and more, in a separate excel file. This file
is maintained in the course of the year and kept updated at all times.
Name of the donor, address, PAN is all that is requested. Most donors comply.
have instructed my clients to maintain details for donations of Rs. 10,000/-
and more, in a separate excel file. This file
is maintained in the course of the year and kept updated at all times.
Name of the donor, address, PAN is all that is requested. Most donors comply.
During
assessments, the questionnaire we receive requires these details. Though
the notice does not mention any limit, the AO upon request
accepts details for donation of Rs. 10000/- and above. Thus I consider
this a threshold limit. This has been my experience.
assessments, the questionnaire we receive requires these details. Though
the notice does not mention any limit, the AO upon request
accepts details for donation of Rs. 10000/- and above. Thus I consider
this a threshold limit. This has been my experience.
The ITR
requires disclosure of Rs. 50,000/- and more, because they
are considered “persons who have made substantial contributions to
the Trust” u/s 13(3)(b). Since my threshold is Rs. 10000/-, these details
are already part of records maintained.
requires disclosure of Rs. 50,000/- and more, because they
are considered “persons who have made substantial contributions to
the Trust” u/s 13(3)(b). Since my threshold is Rs. 10000/-, these details
are already part of records maintained.
Sundeep Wagh
S. M. Wagh & Co.
Chartered Accountants
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Under ITR it is mandatory to provide the PAN in order to cross
verify the information. In the interest of transparency and
identification of donors it is advisable to quote PAN. It may not be
mandatorily enforced but should be implemented voluntarily for self regulation
and governance sake.
Sanjay Mehta
Akkad
Mehta & Co
Mehta & Co
Chartered
Accountants
Accountants
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