NPOs (Non Profit Organizations) are not exempt from criminal laws that apply to individuals or business enterprises. They are covered by following Acts:
PMLA forms the core of the legal framework put in place by India to combat money laundering. PMLA, applicable to charitable institutions w.e.f. 01.06.2009 provides for rigorous punishments for acts treated as money Laundering. The law provides that whoever commits the offence of money laundering shall be punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend upto seven years and shall also be liable fine which may extend to five lakh rupees. Therefore, due care should be taken not to accommodate persons not known to trusts by encashing foreign cheques and drafts.
A charitable NPO should have specific objects. For the organization to be accepted as a charitable organization for the purpose of tax exemption it is all the more necessary that the objects should be specific so as to conform to the requirements of the Income Tax law in this regard.
Further, it is also important to note that the law provides differential treatment for charities in and outside India.
Under the Income Tax Act, exemption which is granted is with respect to the amount applied for the purpose of the trust within India. In case income is applied for charitable purposes outside India, it shall be exempt only under the general or specific orders of the Central Board of Direct Taxes. It is note worthy that the Board can grant exemption only when the purpose of the trust tend to promote international welfare in which India is interested.
With effect from A.Y. 2009-10, a charitable entity which falls in the category of "General Public Utility" shall fall outside the purview of Charitable Organization if it carries out any activity in the nature of trade, commerce or business or business for a cess or fee or any other consideration. Irrespective of the nature of use or retention of such income if the aggregate value of such receipts is more than ₹ 10 lakh. This limit has been enhanced to ₹ 25 lakh from A.Y. 2012-13.
Charitable trusts/institutions are allowed to accumulate or set apart the income derived from property held under the trust, provided they fulfill the condition spelt out in Section 11(2) read with rule 17 of the Income Tax Rules 1962 and Form no. 10. Accumulated Income can be kept only in modes specified in Section 11(5).
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