New Income Tax Return Filing Requirements for NGOs

– Form ITR-7 Explained

Legal Framework

Section 139(4A)/(4B)/(4C)/(4D) of the Income Tax Act, 1961, mandates NGOs with income exceeding the basic exemption limit (2.5 lakhs for AY 2025-26) to file income tax returns using Form ITR-7. This form is designed for trusts, societies, and other entities eligible for tax exemptions under Sections 11, 12, or 10(23C).

Who Must File

Form ITR-7 applies to charitable trusts, religious institutions, political parties, and other specified entities, including those claiming exemptions under Section 11 or Section 10(23C). Filing is mandatory even if income is exempt, to maintain tax benefits.

Example: ”Art for All,” a trust promoting cultural activities, earns 3 lakhs in FY 2024-25, exceeding the exemption limit. It must file ITR-7 by October 31, 2025, due to audit requirements.

Due Dates

• Audited Accounts: October 31st of the assessment year (e.g., October 31, 2025, for AY 2025-26).
• Non-Audited Accounts: July 31st of the assessment year (e.g., July 31, 2025, for AY 2025-26).

Filing Process

The filing process is electronic, conducted via the Income Tax portal:

1. Log in to the Income Tax portal using the NGO’s PAN and credentials.
2. Select "File Income Tax Return” and choose Form ITR-7.
3. Fill in details, including general information (Part A), income sources (Part B), deductions and exemptions (Part C), and tax computation (Part D).
4. E-verify the return using Aadhaar OTP, digital signature, or other methods.

Key Component

• Part A: General information, including PAN, address, and registration details.
• Part B: Details of income from various sources, such as donations and grants.
• Part C: Deductions and exemptions claimed under Sections 11 or 10(23C).
• Part D: Tax computation, including taxable income and tax liability.

Pros and Cons
Pros:

• Ensures compliance with tax laws, maintaining exemptions.
• Enhances credibility with donors and authorities.
• Facilitates financial planning through structured reporting.

Cons:

• Complex form structure requires professional assistance.
• Penalties for late filing can lead to loss of exemptions.
• Time-consuming, especially for NGOs with diverse income sources.

Recent Updates (2025)

For AY 2025-26, notified on May 11, 2025, ITR-7 includes changes in capital gains reporting. NGOs must separately disclose capital gains before and after July 23, 2024, with options for the old (20% with indexation) or new (12.5% without indexation) long-term capital gains (LTCG) regimes for real estate, impacting trusts with property transactions (What’s new in ITR-7 for AY 2025-26).

Table 5: ITR-7 Key Components

Conclusion

Compliance with FCRA and Income Tax regulations is not only a legal necessity but also a cornerstone of operational integrity for NGOs in India. By meticulously following the procedures outlined for FCRA registration, annual returns, donation reporting, bookkeeping, and income tax filing, NGOs can ensure transparency, maintain tax exemptions, and build trust with donors and stakeholders. The recent updates for 2025, including FCRA flexibility and ITR-7 changes, further underscore the importance of staying informed to navigate the evolving regulatory landscape effectively.