Form 10 for NGOs in India: How to Save Tax and Plan Bigger
For NGOs in India, tax exemptions under Sections 11 and 12 of the Income Tax Act are a lifeline. They ensure that the money raised for social causes actually goes into those causes and not into paying taxes. But there’s a catch — every NGO must apply at least 85% of its income in the same financial year.
Now, what happens when your NGO cannot meet this 85% rule? Maybe you are saving for a hospital, a school, or a large project that takes time. This is where Form 10 becomes your strategic tool. Far from being just a compliance requirement, it allows NGOs to protect exemptions and still dream big.
What is Form 10?
Form 10 is a declaration that NGOs and charitable trusts file when they cannot apply 85% of their income in the same year. It gives you:
- Extra breathing room – you can set aside funds for a specific purpose.
- Longer timelines – money can be accumulated for up to 5 years.
- Security – as long as funds are kept in approved investments under Section 11(5), your tax benefits remain intact.
In simple terms, Form 10 ensures your unspent income doesn’t turn into a tax burden.
Why It Matters – Scenarios in Action
Let’s look at some examples to understand how it plays out:
1️⃣ When you spend 85%
Income: ₹1 crore | Spent: ₹90 lakhs | Balance: ₹10 lakhs (within 15%)
✔ Full exemption, no need for Form 10.
2️⃣ When you spend less but file Form 10
Income: ₹1 crore | Spent: ₹70 lakhs | Balance: ₹30 lakhs set aside for a hospital project
✔ Exemption available, income protected through Form 10.
3️⃣ When you spend less and don’t file Form 10
Income: ₹1 crore | Spent: ₹70 lakhs | Balance: ₹30 lakhs
✔ Only ₹15 lakhs (15%) allowed, ❌ remaining ₹15 lakhs becomes taxable.
4️⃣ When Form 10 is filed but funds remain unused
Income: ₹1.5 crore | ₹50 lakhs accumulated for a hospital wing | Only ₹30 lakhs used in 5 years
❌ The unused ₹20 lakhs becomes taxable in the 6th year.
These scenarios show why Form 10 is not optional — it’s the difference between protecting your funds or losing them to tax.
Best Practices to Get It Right
Many NGOs make mistakes because they see Form 10 as “just paperwork.” In reality, it needs strategy. Here’s how to use it effectively:
- File on time – always submit Form 10 before your income tax return due date.
- Be specific – mention the exact purpose for which funds are being accumulated.
- Invest safely – keep funds only in approved modes under Section 11(5).
- Track progress – maintain proper utilisation records; lapses can lead to taxation.
- Seek expert help – compliance professionals can ensure there are no gaps.
For NGOs, Form 10 is not just about saving tax — it’s about unlocking possibilities. It allows you to plan long-term projects like hospitals, hostels, or scholarship programs without losing your exemption.
By using Form 10 strategically, NGOs can move past compliance hurdles and focus on what truly matters: building sustainable impact and scaling their vision.