Registration Process for Approval as Non-Profit Organizations under of Section 2(36)(C) of the Income Tax Ordinance, 2001
In Pakistan, non-profit organizations (NPOs) play a crucial role in addressing various social, educational, and healthcare needs. These organizations, driven by a sense of social responsibility and humanitarianism, strive to make a positive impact on the lives of others. However, to operate legally and avail of tax exemptions, NPOs must undergo a registration process under Clause (36) of Section 2 of the Income Tax Ordinance, 2001. This blog aims to provide a comprehensive guide for NPOs seeking registration under this provision.
Eligibility Criteria for Registration
To be eligible for registration under Clause (36), an NPO must meet the following criteria:
Non-Profit Motive: The organization must be established for charitable, religious, educational, or other public purposes without any intention of making a profit.
Non-Political Affiliation: The organization must not be affiliated with any political party or engage in political activities.
Public Benefit: The organization’s activities must be directed towards the public benefit and not for the benefit of a particular group or individual.
Legal Existence: The organization must have a legal existence, either as a trust, society, or an association registered under the relevant laws.
Required Documents for Registration
The application for registration under Clause (36) must be accompanied by the following documents:
Application Form: The organization must fill out the prescribed application form, providing details such as the organization’s name, objectives, activities, and financial information.
Memorandum of Association or Trust Deed: Copies of the organization’s memorandum of association or trust deed should be attached.
Certificate of Incorporation or Registration: The organization must provide a copy of its certificate of incorporation or registration from the relevant authority.
Financial Statements: Audited financial statements for the preceding three years, if available, should be submitted.
List of Governing Body Members: A list of the organization’s governing body members, including their names, addresses, and designations, must be provided.
Detailed Activity Plan: A detailed plan of the organization’s activities for the upcoming year should be submitted.
Submission of Application: The completed application form along with the required documents must be submitted to the Commissioner of Income Tax (CIT) in the relevant jurisdiction.
Scrutiny and Verification: The CIT will scrutinize the application and supporting documents to ensure compliance with the eligibility criteria and completeness of information.
Approval or Rejection: If the application is found to be in order, the CIT will grant approval, and the organization will be registered under Clause (36). In case of any discrepancies or non-compliance, the CIT may request further information or reject the application.
Validity of Registration
Once granted, registration under Clause (36) is valid for the tax year in which it is granted and the following tax year. To remain registered, the organization must submit an annual statement to the CIT detailing its activities and financial situation.
Benefits of Registration
Registration under Article (36) provides many benefits to Non-Profit Organizations, including:
Exemption from Income: Non-profit organizations receive income from philanthropic, charitable, Religious, educational or other public purposes are exempt from revenue.
Tax Deductible Donations: Donations to non-profit organizations are tax deductible for the donor.
Building trust: Registration provides legitimacy and increases the organization’s trust with donors, partners and the public.
Access to Government Grants: Registered nonprofit organizations may be eligible for government grants and funding.
Consequently, registration under Section 2(36) of the Income Tax Act 2001 is essential for the functioning of a non-profit organisation. Gain tax benefits and increase legal credibility. By following the prescribed registration process and adhering to appropriate standards, nonprofit organizations can effectively meet the social, educational, and nutritional needs of their communities.