Clarification Regarding Applicability of Guidance Note on Financial Statements of Non-Corporate Enti

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This discussion clarifies the applicability of the Guidance Note on Financial Statements of Non-Corporate Entities. It confirms that the guidance applies to educational institutions and NGOs operating under registered trusts or societies, regardless of their income being exempt under the Income Tax Act. The note also remains applicable even when entities receive grants from funding agencies, including FCRA grants, emphasizing the need for accurate financial statement disclosures.

Kunal Kumar Jha

Kunal Kumar Jha (Querist)
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02 August 2025 Respected Sir/Madam,
I am CA Kunal Kumar Jha (Membership No. 516948), and I am seeking clarification regarding the applicability of the Guidance Note on Financial Statements of Non-Corporate Entities issued by the Institute.
My specific query is whether the above-mentioned Guidance Note is applicable in the following cases:
1. Educational institutions such as schools and colleges that are run under a registered trust /Society and whose income is exempt under the Income Tax Act, 1961.
2. NGOs operating under a registered trust /Society, where the main source of income is grants received from funding agencies (including FCRA grants), and such grants are utilized in accordance with the specific directions of the respective funding agencies.
I request you to kindly guide us on whether the Guidance Note is applicable to the entities mentioned above.
Thanking you,

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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02 August 2025 The Guidance Note applies to non-corporate entities, which include trusts and societies. Specifically, it covers entities like:
Educational institutions run by registered trusts or societies
NGOs operating under registered trusts or societies.

The Guidance Note on Financial Statements of Non-Corporate Entities is applicable to both educational institutions and NGOs (under trusts or societies) as long as they are preparing their financial statements in accordance with Indian GAAP, even if their income is exempt from tax under the Income Tax Act.
Exemption under the Income Tax Act, 1961 doesn't exempt these entities from following the Guidance Note. Grants received from funding agencies, including FCRA grants, don't change the applicability of the Guidance Note.
For NGOs, the proper disclosure of grants and adherence to funding agency instructions is critical and should be reflected accurately in the financial statements.

Dhirajlal Rambhia

Dhirajlal Rambhia (Expert)
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24 September 2025 Good Luck...

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