Non-Governmental Organizations (NGOs) and Not-for-Profit Organizations (NPOs) play a vital role in delivering social, humanitarian, educational, and environmental services across Pakistan. Whether they are funded by donors, international agencies, or local philanthropists, financial transparency and compliance are crucial to maintaining credibility, accessing funding, and fulfilling legal obligations.
This article outlines the essential bookkeeping and tax-related services that NGOs and NPOs in Pakistan require throughout the year to operate legally, efficiently, and transparently.
Why Bookkeeping and Tax Compliance Matter for NGOs/NPOs
Maintains donor trust and eligibility for future funding
Ensures compliance with FBR, SECP, and other regulatory bodies
Supports audit readiness and project accountability
Helps track project-wise utilization of funds
Avoids legal penalties and suspension of registration
Monthly Services Required
1. Bookkeeping and Fund Tracking
Record all receipts, donations, grants, and project disbursements
Maintain fund-specific ledgers (education fund, health project, etc.)
Categorize expenses by nature (administrative, program, fundraising)
Reconcile bank statements and cash logs regularly
2. Payroll and Volunteer Payments
Maintain records of employee salaries, honorariums, and stipends
Calculate and deduct income tax (if applicable under Section 149)
Generate payslips and payment schedules
Maintain documentation for volunteers and interns
3. Donor Reporting and Documentation
Maintain receipts for donor contributions
Generate periodic donor utilization reports
Track restricted vs. unrestricted funding
Maintain foreign funding records under regulatory guidelines
4. Sales Tax (if applicable)
Some NGOs operating commercial wings (e.g., vocational centers or product sales) may need to file monthly sales tax returns
Maintain input/output tax record separately from grant funding
Quarterly Services Required
1. Internal Financial Reporting
Generate project-wise profit and loss accounts
Compare actual expenses vs. budgeted allocations
Prepare donor-specific reports with financial and program summaries
Support performance analysis and funding decisions
2. Advance Tax Payments (if required)
Some registered NGOs may be liable to pay advance income tax under Section 147 if engaged in taxable activities
Estimate tax liability and deposit quarterly
3. Budgeting and Forecasting
Update program budgets for new or ongoing grants
Forecast fund shortfalls and propose internal reallocations
Prepare for new funding proposals or audits
Annual Services Required
1. Income Tax Return Filing
File annual income tax return (Form 114) for NPOs registered with FBR
Attach audited financial statements, balance sheet, and statement of income and expenditure
Declare donations, grants, and any commercial income
File wealth statement and reconciliation for board members (if required)
2. Financial Statement Preparation
Prepare audited accounts, including:
Income and expenditure statement
Statement of financial position
Fund accountability statements
Notes to the accounts in accordance with IFRS for NPOs or local standards
3. SECP and Registration Compliance (if applicable)
File Form A and Form 29 annually
Conduct and record Annual General Meetings (AGMs)
Update changes in directors, address, or objectives with SECP or Registrar of Societies
4. Audit and Donor Due Diligence
Support external audits by Chartered Accountants
Coordinate for donor-specific audits or reviews
Ensure all vouchers, receipts, MOUs, and bank reconciliations are ready
Maintain procurement records and bidding documents
One-Time or As-Needed Services
1. Registration and Certification
Register as:
NPO with SECP under Section 42 of Companies Act, 2017
NGO under the Societies Registration Act, 1860
Trust under the Trust Act, 1882
Register with FBR for NTN and tax-exempt status under Section 2(36)
Register with Economic Affairs Division (EAD) for foreign funding approval
2. Tax Exemption Application and Renewal
Apply for tax-exempt status under Section 100C
Renew exemption annually with updated audited accounts
Ensure compliance with Section 236 on donations and voluntary contributions
3. Foreign Funding Compliance
Submit project proposals and MOUs to EAD for approval
Report quarterly and annual utilization of foreign funds
Maintain records of wire transfers, donor agreements, and bank acknowledgments
4. Donor Proposal Support and Financial Planning
Develop budget proposals with justifications
Forecast fund requirements for projects
Assist in due diligence and financial sections of grant applications
5. Responding to Regulatory Notices
Reply to FBR, SECP, or EAD queries or compliance reminders
Resolve notices under Section 176, 161, or 122 (FBR audit sections)
Prepare documentation for appeals or rectifications
Key Bookkeeping Practices for NGOs/NPOs
Maintain separate books for each project or fund
Track restricted vs. unrestricted funds
Maintain receipts, contracts, and beneficiary lists for all disbursements
Maintain budget vs. actual expenditure comparisons
Avoid mixing of commercial and charitable accounts
Recommended Software and Tools
QuickBooks / Xero – for NPO accounting and donor reporting
Tally / Excel – for cost-effective fund tracking
Microsoft SharePoint / Google Drive – for audit trail and donor file management
Grant Management Systems (GMS) – for larger NGOs managing international funding
Benefits of Outsourcing Bookkeeping and Tax Services
Access to professionals familiar with NPO tax laws and donor requirements
Reduced risk of audit failures or regulatory suspension
Timely FBR and SECP compliance
Donor confidence through clean, transparent financials
More time for program implementation and community impact
Frequently Asked Questions (FAQs)
Q: Are NGOs required to file tax returns in Pakistan?
Yes, even tax-exempt NGOs must file annual income tax returns and submit audited accounts.
Q: Can NGOs get tax exemption?
Yes. Under Section 100C, FBR grants tax exemption to qualified NPOs registered with SECP and meeting compliance conditions.
Q: What if an NGO receives foreign funds?
It must register with EAD and file periodic utilization reports. Foreign funding without approval is a regulatory violation.
Q: Can NGOs generate income from services or sales?
Yes, but that income must be used solely for charitable purposes, and separate records must be maintained.
Q: What are the penalties for non-compliance?
Penalties include cancellation of registration, tax demands, disallowance of exemption, and donor blacklisting.
Conclusion
For NGOs and NPOs in Pakistan, managing finances is as important as delivering social impact. Transparent bookkeeping and timely tax compliance not only build donor trust but also protect the organization from regulatory risks. Whether managing small local donations or large international grants, every NGO must treat finance as a core pillar of its operations. Partnering with expert accountants and tax consultants ensures compliance, efficiency, and accountability—allowing nonprofits to focus on what they do best: serving communities.