NGO - Lent out funds received

[NAVIN SINGHAL]

CAN NGO/NPO LENT OUT THE FUND/GRANT RECEIVED BY THEM TO ANT BUSINESS ENTITY WITH OR WITHOUT INTEREST

[Rama Krishana]

The question is not with or without interest. The question is that is it permissible as per the bye laws. Is there any restriction as per the exemption conditions. What undertaking u have given for getting exemption. Whether lending of money is in accordance with the objects. If the answer is yes, I see no harm in lending the same with or without interest.

[DEV KUMAR KOTHARI]

Ethically not, unless it is to subserve purpose of the intuition for example for some work or property or supply etc. Legally and technically Mr. Rama Krishna has give his views, which I feel are sufficient for you to study further, and send your own feed back for benefits of readers. This column of www.taxtmi.com is to initiate discussion and ascertain various possible views to further the object of learning and sharing knowledge and to clear doubts. The issue placed should include some basic information about the subject matter so that readers can at least have some idea about the issue, problem,related provisions and off course the views of the initiator of the issue. This will be helpful in getting better response from learned readers. In absence of the same, the readers cannot be serious about the issue and willing to spare time to merely provide information and solutions. This is my personal view.

Precaution needs to be taken wrt foreign grants. There is restriction under FCRA for transfer of FC funds to person / NGO which dont have FCRA registration.

Also, most of foreign donor put a clause in their grant agreement to avoid co-mingling of funds. It means no funds to be lent to anyone outside grant agreement.

AI Summary

Permissibility of lending by NGOs depends on bylaw compliance, objects, exemption undertakings and foreign grant restrictions.
Permissibility of an NGO lending received funds requires compliance with the NGO's bye laws, alignment with its stated objects, and consistency with any undertakings given for tax or exemption purposes; foreign contributions and donor covenants-including restrictions on transfers to unregistered recipients and prohibitions on co mingling-constitute independent limits that must be checked before lending to outside business entities.