Charities

(Taxpayers Facilitation Guide)

Revenue Division

CENTRAL BOARD OF REVENUE GOVERNMENT OF PAKISTAN

Brochure - 007 February 2004

Revenue Division Central Board of Revenue Government of Pakistan Exposure Draft Brochure - 007 February 2004

Introduction:
This brochure explains various types of charities to help them to understand their eligibility to certain income tax concessions and their obligations under the Income Tax Ordinance, 2001. This brochure also covers the requirements, conditions and procedures of getting approval to avail the applicable tax concessions.

This brochure is to assist the taxpayers and reflects the legal position at the time of printing. In case of any conflict the legal provisions of the law shall always prevail over the contents of this brochure.

Comments and suggestions We welcome your comments about this brochure and your suggestions for future editions. You can e-mail us at membertpef@cbr.gov.pk or You can write to us at the following address: Taxpayer Education and Facilitation, Central Board of Revenue, Constitution Avenue, Islamabad 1 Brochure 007 Charities

Contents
What is charity? To be a charity Objects Non-profit Dissolution Classification of charities under the Income Tax Ordinance, 2001 Informal A trust or other legal obligation Approved by the Commissioner of Income Tax Approved by the Central Board of Revenue General income tax concessions that also apply to charities Educational institutions Special income tax concessions that apply to charities Exemption of income Exemption from levy of minimum tax Tax credit (rebate) to the donors Charities and obligations as withholding agent Obligation of collecting or deducting tax at source On salary paid to employees On payment to non-residents On payment for goods, services and execution of contracts On payment of rent of immovable property etc On payment of or giving prizes and winnings On payment of brokerage and commission Obligation of depositing the tax collected or deducted Obligation of issuing certificate of tax collected or deducted Obligation of filing statements of tax collected or deducted Some words of caution Approval of the Commissioner of Income Tax Charities that qualify for approval How to get approval? Documents to be accompanied alongwith the application for approval Processing of application for approval Validity of approval Circumstances under which approval is not granted How to renew the approval? When to apply for renewal of approval? Documents to be accompanied alongwith the application

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Contents
Processing of application for renewal of approval Validity of renewal of approval Circumstances under which the renewal of approval is not granted How long will it take to grant the approval or renewal of approval What to do once an approval or renewal of approval is granted Circumstances in which approval or renewal of approval given can be withdrawn If an approval or renewal of approval is not granted or withdrawn Does the approval earlier granted under the Income Tax Ordinance, 1979 will hold good or a fresh approval under the Income Tax Ordinance, 2001 is required? Requirements or conditions for approval or renewal of approval can be relaxed? Approval of the Central Board of Revenue Charities that qualify for approval How to get approval Documents to be accompanied alongwith the application for approval Processing of application for approval Validity of approval Circumstances under which approval is not granted How to renew the approval? Validity of renewal of approval Circumstances under which the renewal of approval is not granted Circumstances in which approval or renewal of approval given can be withdrawn Does the approval earlier granted under the Income Tax Ordinance, 1979 will hold good or a fresh approval under the Income Tax Ordinance, 2001 is required? Requirements or conditions for approval or renewal of approval can be relaxed? Prescribed application form for approval from the Commissioner of Income Tax Prescribed application for renewal of approval from the Commissioner of Income Tax Prescribed form of appeal before the Regional Commissioner of Income Tax Prescribed application form for approval from the Central Board of Revenue Prescribed application for renewal of approval from the Central Board of Revenue

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What is charity?
Charity is an organization: Established and operated for humanitarian purposes like: o o The advancement of education; The charity, i.e., Relief of the poor; Education; Medical relief; Orphanage; Homeless hostels; Relief of special needs of people with disabilities; Promotion of fine arts, literature, music etc.; Natural disaster relief; Rehabilitation of victims; Legal assistance; and Advancement of any other object of general public utility; The advancement of religion; The welfare of the community; The development of agriculture, aviation, fishing, horticulture and industries etc.; The promotion of amateur sports; and

To be a charity
The constituent documents must contain the following three fundamentals of a charity: Objects The purposes for which the organization is established spelled out in the object clause of the constituent documents. Non-profit A clause restricting the distribution of profits and gains, e.g., The assets and income of the organization shall be utilized solely in the furtherance of its objects and no portion thereof shall be distributed, paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit or by any other means to the members or trustees or the relative or relatives of a member or members or to any other private person except as bona-fide remuneration for services rendered or expenses incurred on behalf of the organization. Dissolution Similarly, a clause for disposal of the assets on its dissolution, e.g., In the event of the dissolution of the organization, its assets after the satisfaction of all its debts and liabilities, if any, shall be transferred to any organization with similar objects. The income tax law does not prescribe any particular form of words that an organization must incorporate in its constituent documents to be a charity except: In case of an organization approved by the Commissioner of Income Tax under clause (36) of section 2 of the Income Tax Ordinance, 2001 [explained latter in this brochure], the clause relating to the disposal of assets on dissolution, in the constituent documents, must also restrict the transfer of assets to a similarly approved organization.

o o o

Whose activities carried on are not for the sake of earning profit or gain for the private benefit of its individual members directly or in-directly; and Whose assets do not confer, or may confer, a private benefit to any other person. Charity can still make a profit. However, the profits so made must be applied for carrying out the objects of the organization only and must not be distributed to the owners (members, trustees, or other private persons etc.) directly or indirectly under any circumstances.

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Classification of charities under the Income Tax Ordinance, 2001

Charities can be broadly classified into four types for the purposes of applicability of income tax concessions: Informal A trust or other legal obligation Approved by the Commissioner of Income Tax Approved by the Central Board of Revenue

General income tax concessions that also apply to charities

Educational institutions Income of educational institutions including vocational training institutions established solely for educational purposes and not for the purposes of profit is exempt from tax. Such educational institutions of charities equally qualify under the general exemption. The words established solely for educational purposes and not for the purposes of profit do not mean that there should not be any profit or surplus. All it means that the profit or surplus, if any, must be applied for educational purposes and no portion thereof can be distributed, paid or transferred, directly or indirectly, by way of dividend, bonus or otherwise by way of profit or by any other means to the members or trustees or the relative or relatives of a member or members or to any other private person except as bona-fide remuneration for services rendered or expenses incurred on behalf of the educational institution.

1. Informal charities are generally those, which operate on a very low scale at local levels mainly depending upon the voluntary contributions. 2. A trust is an obligation annexed to the ownership of property and arising out of confidence reposed in and accepted by the owner, or declared and accepted by him for the benefit of another, or of another and the owner. Other legal obligation includes Muslim Waqf, Charitable endowments or institutions formed or registered under the Societies Registration Act, 1860, the Charitable Endowments Act, 1890, the Social Welfare Agencies (Registration and Control) Ordinance, 1961 or the Companies Ordinance, 1984. 3. Approved by the Commissioner of Income Tax means approval accorded in accordance with the clause (36) of section 2 of the Income Tax Ordinance, 2001 and Rules 211 to 220 of the Income Tax Rules, 2002 [explained latter in this brochure]. Such charity for the purposes of Income Tax Ordinance, 2001 is referred to as nonprofit organization. 4. Approved by the Central Board of Revenue means approval accorded for the purposes of clause (58) of Part I of Second Schedule to the Income Tax Ordinance, 2001 and Rule 220A of the Income Tax Rules, 2002 [explained latter in this brochure]. 4 Brochure 007

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Special income tax concessions that apply to charities

Exemption of income Applicability of special income tax concessions relating to exemption of certain incomes of the charities depends upon the type of the charity. These are enumerated below:
Nature of income Voluntary contributions including donations and subscriptions Grants received from Federal, Provincial or District Governments Foreign grants Exemption available to (Type of charity) Informal Trust or other legal obligation Approved by the Central Board of Revenue Trust or other legal obligation Approved by the Central Board of Revenue Trust or other legal obligation Approved by the Central Board of Revenue Income from property Trust or other legal obligation To the extent actually applied or set apart for application to the religious or charitable purposes of such organization in Pakistan To the extent actually applied or set apart for application to the religious or charitable purposes of such organization in Pakistan None To the extent expended in Pakistan for the purposes of carrying out welfare activities of such organization; and In proportion to the ratio of income from business to the aggregate incomes from all sources.
Example Income from voluntary contributions Income from property Income from business Total income from all sources Amount expended in Pakistan for carrying out welfare activities 6. Exempt income from business [3 divided by 4 and multiplied by 5] 1. 2. 3. 4. 5. Rs. 50,000 Rs. 15,000 Rs. 35,000 Rs. 100,000 Rs. 20,000 Rs. 7,000

Applicable restrictions and conditions, if any, for availing exemption To the extent received solely for the religious and charitable purposes of such organization None To the extent actually applied or set apart for application to the religious or charitable purposes of such organization in Pakistan

Approved by the Central Board of Revenue Income from business Approved by the Central Board of Revenue

Profit on investments in the securities of the Federal Government Profit on debt from scheduled banks

Trust or other legal obligation

To the extent actually applied or set apart for application to the religious or charitable purposes of such organization in Pakistan None To the extent actually applied or set apart for application to the religious or charitable purposes of such organization in Pakistan

Approved by the Central Board of Revenue Trust or other legal obligation Approved by the Central Board of Revenue

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Exemption from levy of minimum tax Charities approved by the Commissioner of Income Tax (non-profit organizations) enjoy exemption from levy of minimum tax of 0.50% of their turnover. Tax credit (rebate) to the donors Charitable donations, both in cash or kind, given to charities approved by the Commissioner of Income Tax (non-profit organizations), entitle the donor (payee) to a tax credit (tax rebate) against its tax liability. The pre-requisites to avail this tax concession are: Charitable donations, both in cash or kind, are given to charities approved by the Commissioner of Income Tax (non-profit organization); Charitable donations (other than in kind) are given through crossed cheque drawn on a bank; and

Where the donor (payer) is a company: Eligible amount is lower of the: Amount of charitable donations and/or fair market value of the property given; or 15% of the taxable income
Example I 1. Amount of charitable donations Rs. 40,000 2. 15% of taxable income Rs. 15,000 3. Eligible amount (lower of 1 or 2) Rs. 15,000 Example II Rs. 10,000 Rs. 15,000 Rs. 10,000

The amount and/or value of charitable donations eligible for tax credit (rebate) is subject to the following limits: Where the donor (payer) is an individual or association of persons: Eligible amount is lower of the: Amount of charitable donations and/or fair market value of the property given; or 30% of the taxable income
Example I 1. Amount of charitable donations Rs. 40,000 2. 30% of taxable income Rs. 30,000 3. Eligible amount (lower of 1 or 2) Rs. 30,000 Example II Rs. 20,000 Rs. 30,000 Rs. 20,000

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Charities and obligations as withholding agent

The obligation of collecting or deducting tax at source, depositing the tax collected or deducted, issuing certificate of collection or deduction and filing of statements etc. relating to collection or deduction of tax at source is explained in detail in our brochure titled as Collection and deduction of tax at source. An overview of such obligations relating to nonprofit organizations is given below. Obligation of collecting or deducting tax at source On salary paid to employees All types of charities (informal, trust, other legal obligation, approved by Commissioner of Income Tax and approved by the Central Board of Revenue) have the same obligations to deduct tax at source from salary paid to an employee(s) as any other employer. On payment to non-residents Again all types of charities have the same obligations to deduct tax at source from payment made to a non-resident, as any other person, on account of: royalty; fees for technical services; a turnkey contract; a contract or sub-contract for the design, construction or supply of plant and equipment under a power project; a contract or sub-contract under a construction, assembly or installation project in Pakistan, including a contract for the supply of supervisory activities in relation to such project; any other contract for construction or services rendered; any other payment.

On payment for goods, services and execution of contracts Charities that are: an association of persons constituted by or under any law; or a company;

fall in the list of prescribed persons obliged to deduct tax at source from payment made on account of sale of goods, rendering of services and execution of contract. On payment property etc of rent of immovable

Charities that are a company or approved by the Commissioner of Income Tax or approved by the Central Board of Revenue are obliged to deduct tax at source from the payment of rent of immovable property including rent of furniture and fixtures, and payment for services relating to such property. On payment of or giving prizes and winnings All types of charities have the same obligations to deduct tax at source from payment of or giving prizes and winnings (both in cash and kind). On payment commission of brokerage and

Charities that are a company or an association of persons are obliged to deduct tax at source from the payment of brokerage or commission. Obligation of depositing the tax collected or deducted Deposit tax deducted within seven days of the deduction in Government Treasury or State bank Of Pakistan or National bank of Pakistan using the prescribed challan (deposit slip / memo) form for this purpose.

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Obligation of issuing certificate of tax collected or deducted Charities that collect or deduct tax at source are required to issue certificate of tax collected or deducted to the respective person in the prescribed form. Obligation of filing statements collected or deducted of tax

Some words of caution

Incomes of charities from the following sources are not exempt from tax: Income from property except as indicated earlier in this brochure. Income from business (including incomes subject to collection or deduction of tax at source as final tax) except as indicated earlier in this brochure.
In order to avail exemption of incomes subject to final taxation, the charities approved by Central Board of Revenue for the purposes of clause (58) of Part I of Second Schedule to the Income Tax Ordinance, 2001 may obtain withholding tax exemption certificate from the Commissioner of Income Tax. Once the tax is collected or deducted at source neither exemption can be availed nor refund of such tax can be claimed.

Charities that collect or deduct tax at source are required to file quarterly, six monthly and annual statements of tax withheld and deposited on the prescribed forms.

association of persons includes an artificial juridical person. company includes a company formed and registered under the Companies Ordinance, 1984; a body corporate formed by or under any law in force in Pakistan; a body incorporated by or under the law of a country outside Pakistan relating to incorporation of companies; a trust; a co-operative society registered under the Co-operative Societies Registration Act, 1925; a co-operative society registered under any law for the time being in force in Pakistan for the registration of co-operative societies; any other society established or constituted by or under any law for the time being in force; or a foreign a foreign association whether incorporated or not, which the Central Board of Revenue has, by general or special order, declared to be a company for the purposes of Income Tax Ordinance, 2001.

Capital gains arising on disposal of property of any kind whether or not connected with business excluding stockin-trade, property in respect of which deduction for depreciation or amortization is admissible and any immoveable property. Other sources i.e. Dividend; Royalty; Profit on debt except as indicated herein before. Ground rent; Rent from the sub-lease of land or a building; Income from the lease of any building together with plant or machinery; Income from provision of amenities, utilities or any other service connected with renting of building; Any prize on a bond, or winnings from a raffle, lottery, prize on winning a quiz, prize offered by companies for promotion of sale or cross word puzzle; Fair market value of any benefit or amount received as consideration for the provision, use or exploitation of property; Amount received as consideration for vacating the possession of a building or part thereof;

For further details please refer to our Brochure 005 - Collection and Deduction of tax at source (withholding agents perspective).

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Approval of the Commissioner of Income Tax

Charities that qualify for approval A charity established in Pakistan for: religious; educational; charitable; welfare or development purposes; or for the promotion of an amateur sport; and

The qualification of the auditor for this purpose is as under: Annual Receipts Upto Rs. 0.50 million Qualification of the Auditor A retired audit, accounts, treasury or taxation officer of the Government not below Basic pay Scale 17 or a bank manager. A cost and Accountant. Management

Exceeding Rs. 0.50 million and upto Rs. 3.0 million Exceeding Rs. 3.0

formed and registered under any law as a nonprofit organization qualify for getting approval of the Commissioner of Income Tax. Any law includes Societies Registration Act, 1860, the Charitable Endowments Act, 1890, the Social Welfare Agencies (Registration and Control) Ordinance, 1961 or the Companies Ordinance, 1984. How to get approval? A qualifying charity can get an approval by submitting an application to the Commissioner of Income Tax in the prescribed form alongwith the schedule thereto (Annex I). Documents to be accompanied alongwith the application for approval Attested copy of the constitution, memorandum and articles of association, rules, regulations or bye-laws, as the case may be, specifying the aims and objects. Certified copy of the registered trust deed, where applicable. Certified copy of certificate of registration or incorporation etc., as the case may be, where applicable. Attested copy of the audited financial statements for the preceding year. (Balance sheet and revenue account / income statement / profit and loss account).

A Chartered Accountant

Names and addresses of the promoters, directors, trustees, president, secretary, treasurer, manager and other office bearers, as the case may be, indicating clearly their family relationships, if any, with each other. An evaluated and certified report with regard to the performance of the qualifying charity in achieving the aims and objects during the three preceding financial years. The Evaluation and certification is required to be done by an independent certification agency approved by an authority designated by the Government of Pakistan for this purposes or, till that authority is established, under arrangements made by the Central Board of Revenue. Philanthropy Centre of Pakistan has been approved as one of the evaluation and certification agency and till the approval of another such agency a charity has an option to get itself evaluated and certified by the Central Board of Revenue.

Processing of application for approval The Commissioner of Income Tax may make such inquiries or call for such further information as deemed necessary and after completion of the formalities may grant the approval. 9

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An approval granted shall be: Notified in the official gazette; and Subject to such conditions as specified in the approval.

for the maintenance of accounts with Directorate of National Savings, National Bank of Pakistan, a scheduled bank, post office, or nationalised commercialised banks; for prohibiting the making of any changes in the constitution, memorandum and articles of association, trust deed, rules and regulations or by-laws, as the case may be, without the prior approval of the Commissioner of Income Tax; for restricting the money validly set apart or not utilised to twenty five per cent of the income including the surplus out of the donations; and
In case, accounting period closes within three months of the commencement of activities, the Commissioner of Income Tax can relax this condition upto 50%.

Validity of approval An approval granted is valid until the 30th day of June of the tax year next following the tax year in which the approval is given. Circumstances under which approval is not granted If the constitution, memorandum or articles of association, rules, regulations or byelaws, or trust deed, as the case may be, specifying the aim and objects does not provide: for the audit of its annual accounts; for the quorum of a meeting of the members in which the control of the affairs of the charity vests, in case of a charity other than a trust, of not less than four or onethird of the total number of the members of such body, whichever is greater; or in case of a trust, of not less than three or one-third of the total number of the members of such body, whichever is greater; in the event of its dissolution for the transfer of its assets after meeting all liabilities, if any, to another similarly approved charity, within three months of dissolution under intimation to the Commissioner of Income Tax; for the utilisation of its money, property or income or any part thereof solely for promoting its objects; for prohibiting any portion of its money, property or income being paid or transferred directly by way of dividend bonus or profit to any of its members or the relative or relatives of a member or members;

If the money set apart or not utilized in excess of the above mentioned limits is not invested in Government securities, scheduled banks, NIT Units or mutual funds registered with State Bank of Pakistan or Securities and Exchange Commission of Pakistan is produced.
Subject to the condition that such deposit or investment in or through the scheduled banks shall not exceed 1/3rd of the surplus at the end of the year.

If the Commissioner of Income Tax is satisfied that the applicant charity: has been or is being used for personal gains of any particular person or a group of persons; has been propagating the views of a particular political party or religious sect; has been or is being managed in a manner calculated to personally benefit its members or their families; or has not or will not be able to achieve its declared aims and objects in view of its set up, administration or otherwise as evaluated and certified by an independent certification agency.

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The Commissioner of Income Tax will notify the applicant, in writing, of his decision to refuse the approval alongwith a statement of reasons for the refusal. How to renew the approval? A charity approved by the Commissioner of Income Tax (non-profit organization) can renew its approval by submitting an application to the Commissioner of Income Tax in the prescribed form alongwith the schedule thereto (Annex II). When to apply for renewal of approval? An application for renewal of approval can be furnished within six months from the expiry of the validity of the approval or renewal last granted. Documents to be accompanied alongwith the application for renewal of approval Documents to be accompanied alongwith the application for renewal of approval is the same as required for the initial approval (see page 09 of this brochure), except that the requirement of performance evaluation and certification from an approved agency will be applicable from July 01, 2004. Processing of application for renewal of approval The processing of application for renewal of approval is done in the same manner as the initial approval (see page 09 of this brochure). Validity of renewal of approval The first renewal of approval is valid until the 30th day of June of the second tax year next following the tax year in which the renewal of approval is given. All subsequent renewals of approval will be valid for a period extending upto three years depending upon the independent certification agencys report and audit results. Circumstances under which the renewal of approval is not granted If the charity applying for renewal does not enjoy approval in the tax year immediately preceding the tax year in which the renewal application is made. 11 Brochure 007

If the Commissioner of Income Tax is satisfied that: the provisions for prohibiting the making of any changes in the constitution, memorandum and articles of association, trust deed, rule and regulations or by-laws, as the case may be, without the prior approval of the Commissioner of Income Tax has not been complied with; the charity is being: used for personal gains of any particular person or a group of persons; or propagating the views of a particular political party or religious sect; or managed in a manner calculated to personally benefit its members or their families; or unable to achieve its declared aims and objects in view of its set up, administration or otherwise as evaluated and certified by an independent certification agency.

The non-profit organization has not complied with its obligations of submitting its annual accounts etc. (explained latter in this brochure); and otherwise the requirements for approval in the preceding three years have not been complied with. The Commissioner of Income Tax will notify the applicant, in writing, of his decision to refuse an application to renew the approval alongwith a statement of reasons for the refusal. How long will it take to grant the approval or renewal of approval The Commissioner of Income Tax will finalise applications for approval and renewal of approval within two months of receipt of the application. What to do once an approval or renewal of approval is granted A charity approved by the Commissioner of Income Tax (non-profit organisation) or whose

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approval has been renewed is required to submit by the 31st July of each year to the Commissioner of Income Tax and to the concerned certification agency, in respect of the preceding tax year: a copy of the annual audited financial statements, as explained earlier in this brochure; a statement of income, donations received and moneys paid; a list of donees and beneficiaries with full addresses; and a statement showing the money set apart or kept un-utilised with reasons thereof.

If an approval or renewal of approval is not granted or withdrawn A charity dissatisfied with the decision: refusing to grant approval or renewal of approval; or withdrawing an approval or renewal of approval,

may lodge an appeal with the Regional Commissioner of Income Tax in the prescribed form (Annex III). Does the approval earlier granted under the Income Tax Ordinance, 1979 will hold good or a fresh approval under the Income Tax Ordinance, 2001 is required? The approval granted under the Income Tax Ordinance, 1979 and the corresponding Income Tax Rules, 1982 is deemed to have been withdrawn unless an application for renewal is submitted under the Income Tax Ordinance, 2001 and Income Tax Rules, 2002 (explained earlier in this brochure) before 30th June 2004. Requirements or conditions for approval or renewal of approval can be relaxed? The Commissioner of Income Tax may relax or modify any of the requirements or conditions of approval or renewal of approval, on case-tocase basis, on being satisfied that the applicant cannot fulfil the requirements or conditions of approval or renewal of approval for reasonable cause.

Circumstances in which approval or renewal of approval given can be withdrawn Approval or renewal of approval granted earlier can be withdrawn: if the charity fails to submit its annual audited financial statements alongwith statement of incomes, donations received and moneys paid, list of donees and beneficiaries and statement of money set apart or kept un-utilised and the reasons thereof; and if the Commissioner of Income Tax is satisfied that: the charity has failed to fully utilise its income and the donations received by it for achieving the purpose for which it was established; or the reason for setting apart, or for not utilising, the income and donations received, is not valid. Approval or renewal of approval once granted cannot be withdrawn unless an opportunity to show cause against the proposed action to be taken is given. Where the Commissioner of Income Tax withdraws an approval or renewal of approval, he will intimate his decision in writing alongwith a statement of reasons for such decision to the charity and the certification agency. 12 Brochure 007

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Approval of the Central Board of Revenue

Charities that qualify for approval A charity approved by the Commissioner of Income Tax (non-profit organization), qualifies for getting a further approval from the Central Board of Revenue and resultantly further related tax concessions if: Formed for the purpose of: Establishing hospitals; or Providing education; or Community welfare or development; Operated and functioned anywhere in Pakistan, for a period of not less than three years; Complies with minimum acceptable standards of internal governance, accountability, transparency and efficiency prescribed by any law for the time-being in force; Area of its operation is wholly within Pakistan; and Books of account are maintained regularly in accordance with generally accepted accounting principles and satisfactory arrangements exist for their inspection by interested members of the public.

performance evaluation and certification is required to be done by an agency approved and appointed by the Central Board of Revenue instead of an agency approved by an authority designated by the Government of Pakistan.

Processing of application for approval The Central Board of Revenue may make such inquiries or call for such further information as deemed necessary and after completion of the formalities may grant the approval. An approval granted shall be notified in the official gazette. Validity of approval An approval granted is valid for the tax year in which the approval is granted and for two following tax years. Circumstances under which approval is not granted Circumstances under which this approval is not granted are almost same as in case of an approval not granted by the Commissioner of Income Tax (see page 10 of this brochure). In addition this approval is not granted if the constituent document does not provide for regular maintenance of books of account in accordance with the generally accepted accounting principles and for their inspection by the interested members of the public, without any hindrance, at all reasonable times. On the other hand this approval cannot be denied where the constituent documents provide that the assets on dissolution can be transferred either to a similarly approved charity or a charity approved by the Commissioner of Income Tax (non-profit organization). The Central Board of Revenue can relax the limit on restricting the money validly set apart or not utilized in any case under any circumstances. The applicant charity will be given an opportunity to show cause before refusing to grant an approval.

How to get approval A qualifying charity can get this approval by submitting an application to the Central Board of Revenue in the prescribed form alongwith the schedule thereto (Annex-IV). Documents to be accompanied alongwith the application for approval Documents to be accompanied alongwith the application for this approval are same as required for an approval of the Commissioner of Income Tax (see page ___ of this brochure) except that the: audited financial statements are to be submitted for the three preceding years instead of one year; and

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How to renew the approval? Renewal of this approval can be obtained by submitting an application to the Central Board of Revenue in the prescribed form alongwith the schedule thereto (Annex-V). When to apply for renewal of approval? An application for renewal of approval can be furnished within three months of the expiry of the validity of the approval or renewal last granted. Documents to be accompanied alongwith the application for renewal of approval In addition to the documents required for initial approval, following further documents are to be accompanied alongwith the application for renewal of approval: copies of Income Tax Returns and the related assessment orders, if any; statements of income, donations received and moneys paid; statements showing the money set apart or kept unutilized with reasons thereof; the names and addresses of the promoters, directors, trustees, president, secretary, treasurer, manager and other office bearers, as the case may be, indicating clearly their family relationships, if any with each other; copies of the annual report in respect of the activities and performance;

Validity of renewal of approval Renewal of approval will be valid for the tax year in which the application is made and two following tax years. Circumstances under which the renewal of approval is not granted If the charity applying for renewal does not enjoy approval in the tax year immediately preceding the tax year in which the renewal application is made. The applicant charity will be given an opportunity to show cause before refusing to grant renewal of an approval. Circumstances in which approval or renewal of approval given can be withdrawn Approval or renewal of approval granted can be withdrawn, at any time, if: all the conditions and requirements of approval or renewal of approval are not complied with; or on account of disqualifications. any one or more

The applicant charity will be given an opportunity to show cause before withdrawing the approval or renewal of approval. Does the approval earlier granted under the Income Tax Ordinance, 1979 will hold good or a fresh approval under the Income Tax Ordinance, 2001 is required? The approval granted under the Income Tax Ordinance, 1979 and the corresponding Income Tax Rules, 1982 is deemed to have been withdrawn unless an application for renewal is submitted under the Income Tax Ordinance, 2001 and Income Tax Rules, 2002 (explained earlier in this brochure) before 30th June 2004. Requirements or conditions for approval or renewal of approval can be relaxed? The Central Board of Revenue may relax or modify any of the requirements or conditions of approval or renewal of approval, on case-tocase basis, on being satisfied that the applicant cannot fulfill the requirements or conditions of approval or renewal of approval for a reasonable cause. 14

of the three tax years preceding the tax year in which application is made. Processing of application for renewal of approval The Central Board of Revenue may make such inquiry or call for such further information as deemed necessary and after satisfying that a genuine charity existed in the preceding year that complied with at all times, all the conditions and requirements of renewal of approval and did not suffer from any one or more disqualifications. The renewal of approval granted shall also be notified in the official gazette.

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Annex I APPLICATION FOR APPROVAL FOR THE PURPOSES OF CLAUSE (36) OF SECTION 2 OF THE INCOME TAX ORDINANCE, 2001 To, The Commissioner of Income Tax, _______________________Zone, _______________________(City). 1. With reference to clause (36) of section 2 of the Income Tax Ordinance, 2001 (XLIX of 2001), I the undersigned, hereby apply, on behalf of __________________________________________ (name of the organization) for its approval for the purposes of the said clause for the tax year ending on __________________. Necessary particulars are set out below, and in the schedule to this application.

2. 3.

The following documents required under sub-rule (2) of rule 211 of the Income Tax Rules, 2002, are enclosed. (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________ _______________________________________________________________________

Signature ________________________ Name (in block letters) ________________________ Designation ________________________

Application must be signed either by the President or the Secretary of the organization or by a Trustee, of the trust.

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SCHEDULE Particulars 1. 2. 3. 4.
Name of the organization (in block letters) Full address of the organization (in block letters) Date of registration of the organization Its aims and objects.

___________________________________ ___________________________________ ___________________________________ (a) (b) (c) (d) ___________________________________ ___________________________________ ___________________________________ ___________________________________

5.

Whether the organisation has been registered under the Societies Registration Act, 1860 (XXI of 1860), or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or any other law in substitution thereof relating to the registration of welfare organisation or established in pursuance of a Trust Deed. Please give/state the law and the number and date of registration Whether constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, conform(s) to the provisions of sub-rule (1) of rule 213. If so, please give the number of Article/ Clause/ Rule etc., for each provision. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). The number of members /trustees organization on the date of application. of the

6.

7.

8.

9.

Accounting year of the organisation commences

on

_______________________________and

ends on __________________________________ 10.

The following books of accounts are being regularly maintained by the organization and are open for inspection without any hindrance to the general public.

i) ii) iii)

____________________________________ ____________________________________ _____________________________________

Signature ________________________ Name (in block letters) ________________________ Designation ________________________ 16 Brochure 007 Charities

Annex II APPLICATION FOR RENEWAL OF APPROVAL FOR THE PURPOSES OF CLAUSE (36) OF SECTION 2 OF THE INCOME TAX ORDINANCE, 2001 To, The Commissioner of Income Tax, _______________________ Zone, _______________________(City). 1. I, the undersigned, hereby apply for the renewal of approval of ___________________________ _______________(name of the Organization) for the tax year ending on ___________________. 2. The ____________________________________________________ (name of the Organization) was approved as a Non-Profit Organization by the Commissioner vide Notification No _________ dated ____________________. 3. It is hereby certified that:(a) constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, previously filed with the Commissioner, have remained unchanged; the disqualification mentioned in sub-rule (1) of rule 213 do not apply to the organization; the organization has fully complied with the provisions of Rule 213; and the information given above and in the attached Schedule is correct.

(b) (c) (d)

Signature ________________________ Name (in block letters) ________________________ Designation ________________________

Application must be signed either by the President or the Secretary of the organization or by a Trustee, of the trust.

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SCHEDULE Particulars
1. 2. 3. 4. Name of the organization (in block letters) Full address of the organization (in block letters) Date of registration of the organization Its aims and objects (a) (b) (c) (d) 5. 6. Date of approval granted under clause (36) of section 2 the Income Tax Ordinance, 2001. Whether the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, as the case may be, conform(s) to the provisions of sub-rule (1) of rule 213. If so, please give the number. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). The number of members/ trustees organization on the date of application. of the ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________

7.

8. 9.

Accounting year of the organization commences On

_______________________________________ and

ends on __________________________________________. 10. The following books of accounts are being regularly maintained by the institution and are open for inspection without any hindrance to the general public. (i) (ii) (iii) ___________________________________________ ___________________________________________ ___________________________________________

Signature ________________________ Name (in block letters) ________________________ Designation ________________________

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Annex III
GROUNDS OF APPEAL (i) (ii) (iii) (iv) (v) ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________

We/I_________________________________________________________________________ the appellant(s) named in the above appeal do declare that what is stated therein is true to the best of our/my information and belief. Signature Name (in block letters) Address PARTICULARS 1. 2. 3. 4. Name of the organization (in block letters) Full address of the organization (in block letters) Date of establishment of the organization Its aims and objects (a) (b) (c) (d) 5. ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ___________________________________________ ________________________ ________________________ ________________________

Dated: ________________, 20____

Whether the organisation has been registered under the Societies Registration Act, 1860 (XXI of 1860), or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or any other law in substitution thereof relating to the registration of welfare organisation or established in pursuance of a Trust Deed. Please give/state the law and the number and date of registration Whether constitution, memorandum and articles of association, trust deed, rules and regulations or byelaws, as the case may be, conform(s) to the provisions of sub-rule (1) of rule 213. If so, please give the number of Article/ Clause/ Rule etc., for each provision. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). The number of members/ trustees of the organization on the date of application.

6.

7.

8.

Signature Name (in block letters) Designation

________________________ ________________________ ________________________

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Annex IV Application for Approval under clause (58) of Second Schedule to the Income Tax Ordinance, 2001 To, The Secretary, Central Board of Revenue, Islamabad.

With reference to clause (58) of the Second Schedule to the Income Tax Ordinance, 2001 (XLIX of 2001), I, the undersigned, hereby apply, on behalf of _______________________________ ________________________________________________________(name of the organisation) for its approval for the purposes of the said clause for the tax year ending on ________________.

2.

Necessary particulars are set out below, and in the schedule to this application.

3.

The following documents required under clause (b) of sub-rule 1 of Rule 220A are enclosed. (i) (ii) (iii) (iv) (v) ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________ ________________________________________________________________

Signature ________________________ Name (in block letters) ________________________ Designation ________________________

Application must be singed either by the President or the Secretary of the organisation or by a Trustee of the Trust.

20 Brochure 007 Charities

SCHEDULE Particulars
1. 2. 3. 4. Name of the Organization (in block letters) Full address of the organization (in block letters) Date of registration of the organization Its aims and objects (a) (b) (c) (d) 5. Where the organization has been registered under the Societies Registration Act, 1860 (XXI of 1860), or the Voluntary Social Welfare Agencies (Registration and Control) Ordinance, 1961 (XLVI of 1961), or any other law or established in pursuance of a Trust Deed. Please give/ state the law, the number and date of Registration Whether the constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, conforms to the provisions of sub-rules (2) and (3) of rule 220A. If so, please give the number of article/ clause/ rule for each provision. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). The number of members/ trustees organization on the date of application. of the _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________ _________________________________________

6.

7.

8. 9.

Accounting year of the organization commences on

_______________________________________ and

ends on __________________________________________. 10. The following books of accounts are being regularly maintained by the institution and are open for inspection without any hindrance to the general public. (i) _________________________________________ (ii) (iii) __________________________________________ __________________________________________ ________________________ ________________________ ________________________

Signature Name (in block letters) Designation

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Annex V Application for renewal of approval under clause 58 of the Second Schedule to the Income Tax Ordinance, 2001. To, The Secretary, Central Board of Revenue, Islamabad.

I, the undersigned, hereby apply for the renewal of approval of ______________________ ____________________(Name of organisation) for the tax year ending on _________________.

2.

The ____________________________________________________ (name of the Organisation) was approved by the Board vide Notification No. _________ dated _______________.

3.

It is hereby certified that (a) constitution, memorandum and articles of association, trust deed, rules and regulations or bye-laws, previously filed with the Central Board of Revenue, have remained unchanged; (b) the disqualification mentioned in the sub-rule (3) of rule 220A do not apply in the case of the organisation; (c) the organisation has fully complied with the provisions of sub-rule (4) of rule 220A; and (d) the information given above and in the attached Schedule is correct.

4.

The annual report of the organisations performance or activities in the immediately preceding years is enclosed.

Signature ________________________ Name (in block letters) ________________________ Designation ________________________

Application must be singed either by the President or the Secretary of the organisation or by a Trustee of the Trust.

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SCHEDULE Particulars
1. 2. 3. 4. Name of the organization (in block letters) Full address of the organization (in block letters) Date of registration of the organization Its aims and objects (a) (b) (c) (d) 5. Date of approval granted under clause (58) of Second Schedule to the Income Tax Ordinance, 2001. Whether the constitution, memorandum and articles of association trust deed, rules and regulations or bye-laws conforms to the provisions of sub-rule (4) of rule 220A. If so, please attach documents and instruments as are specified in clause (b) of subrule (1) of rule 220A. Whether the organization ensures for the benefit of the general public or a particular community or class of persons only (give full details). The number of members/ trustees of the on the date of application. Accounting year of the organization commences on ________________________________________and __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________ __________________________________________

6.

7.

8. 9.

ends on __________________________________________. 10. The following books of accounts are being regularly maintained by the institution and are open for inspection without any hindrance to the general public. (i) ___________________________________________ (ii) (iii) ___________________________________________ ___________________________________________

Signature Name (in block letters) Designation

________________________ ________________________ ________________________

23 Brochure 007 Charities