You can save your money with 80G certified NGOs.

Section 80G

Under the Income Tax Act, certain contributions or donations are eligible for a tax deduction under Section 80G Certificate. NGOs and other non-profit organisations must register and validate themselves with the Income Tax Department to receive such certifications.?

Since such organisations attract donations from corporations and individuals, they must have stringent measures to ensure transparency and efficiency. The government provides such organisations with various tax benefits and deductions as they perform charitable activities.?

It is common for us to consider donating to charity and contributing to society in some way. Due to the noble nature of this gesture, the government provides tax deductions for donations to charitable organizations.?Contributions to relief funds and charitable institutions are deductible under section 80G of the Indian Income Tax Act.?As a result, you can take advantage of Section 80G in addition to Section 80C to save as much tax as possible.

Generally, if you have donated to charitable trusts or section 8 companies or organisations, you are entitled to an 80G certificate, which exempts you from paying taxes in part or full.

Eligibility to Claim Deduction Under Section 80G

The following taxpayers can claim the deduction provided in this section:

• Individuals
• Companies
• Firms
• Hindu Undivided Firm (HUF)
• Non-Resident Indian (NRI)
• Any other person

It is important to note that not all donations are eligible for deductions under Section 80G. Only donations made to prescribed funds are qualified for this deduction.

Eligibility for Section 80G Exemptions

Only donations to charities under Section 80G are eligible for an 80G deduction and registration. Most charities with a religious or business angle do not receive 80G certification. Similarly, gifts made to trusts outside India are not eligible for such a tax deduction. Additionally, individuals who donate to private trusts that do not have an 80G registration or to political parties cannot avail of any tax exemption for the amounts donated. Such contributions and donations will still be a part of their taxable income.

What Is the Mode of Payment Under Section 80G?

Taxpayers can claim Section 80G deductions when they make donations using the following methods:

• Cheque
• Demand draft
• Cash for donations below ?2,000
• It’s important to note that in-kind contributions such as food, material, clothes, medicines and donations exceeding ?2,000 do not qualify for deductions under Section 80G. Donations above ?2,000 must be made through modes other than cash to be eligible for deduction under Section 80G.

Section 80G specifies various types of donations that are eligible for deductions, ranging from 100% to 50% with or without restrictions, as outlined in the provisions of Section 80G.

What Are the Tax Deductions Under 80G?

Taxpayers are eligible for an exemption under 80G if they comply with certain specifications regarding the mode of payment, percentage eligible for a deduction, and so on. Here’s a quick look at those criteria that make individuals eligible for a tax?80TTB deduction

• Payment Mode

All contributions made to charitable institutions must be through cheques or demand drafts. In the case of a cash contribution, the amount donated must be below ?10,000 to be eligible for a tax deduction. Any contributions, like clothes, gift items, or food, cannot claim as a donation for tax exemption.

• Percentage of Contribution Eligible for Deductions

Not all funds come under the 80G category, and only donations to individual funds receive a 100% tax exemption for the amount paid. The others are eligible for a 50% tax exemption. Additionally, any donations made to a trust or NGO that do not have an 80G certification are not eligible for tax exemption. It is, therefore, essential for trusts, NGOs, and welfare societies looking for donations from fellow citizens to go ahead and apply for an?80u Income tax.

Documents Required for Section 80G

If you have donated to a fund or a charitable institution with an 80G certificate, you must submit the following documents when filing your returns.

• Stamped Receipt

All trusts and organisations receiving donations must provide a stamped receipt for the funds gained. Individuals must ensure they keep this receipt safe and submit it while filing tax returns to claim exemptions. The receipts should contain the organisation’s name, official stamp, PAN number, and date of issue.

Eligibility for 80G Certification

Not all NGOs or trusts are eligible for 80G certification, as there are certain rules and guidelines regarding what non-profits are eligible for. Here is a quick look at the several conditions organisations have to meet to obtain an 80G certification:?

1. Separation of Business and Charity:?If your organisation is involved in any business apart from its charitable component, you will have to segregate it to receive an 80G exemption certificate
2. No Misuse:?The donations received towards the cause should not be misused on any account or used for any other purpose, even within the organisation. Hence, all such organisations have to maintain strict accounting principles to prove they have not misused any funds
3. No Religious Activity:?Any NGO or trust that engages in religious preaching, or works for a particular caste or creed, is not eligible for 80G certification
4. Proper Accounting:?As mentioned earlier, organisations must maintain accurate and up-to-date accounting books and records of financial transactions as proof before applying for an 80G exemption
5. Appropriate Registration:?The organisation must be with registration under the Societies Registration Act of 1860 or Section 25 of the Companies Act of 1956.

Tax Benefits to the Organisation

The certification helps donors reduce their tax liability by 10% to 50% on the amount donated. However, the 80 G certification does more than allow donors to claim tax exemption on their donations. It also provides organisations with several tax benefits. The institution can get an exemption of 10% for the gross income obtained through donations and contributions.?

Moreover, the Income Tax Department:?https://incometaxindia.gov.in/Pages/default.aspx?has the power to approve or reject such requests upon disqualification of the non-profit organisation or dissatisfaction with its activities. While the primary role of 80G certification is to encourage donors to donate funds to non-profit organisations, it can help organisations in several ways.?

80g Registration: How to Apply for an 80G Certificate

An 80G certification is a document issued by the Income Tax Department to certain not-for-profit organisations, allowing their donors to avail of tax deductions on donations. Hence, NGOs and other non-profit organisations must obtain an 80G registration at the earliest to increase their donations. To apply for an 80G certificate, organisations must first obtain a 12A certificate. Next, the organisation has to duly fill and submit Form 10G, along with a copy of their activity report for the past one to three years. Additionally, non-profits must also provide an audited statement for the past three years to complete the verification process.?

While the Income Tax Department’s website contains a copy of the 80G application form, the registration process is arduous. Hence, most non-profits take the help of professional legal service providers to complete their 80G registration. Since even a small error made while filing can create long delays, it is advisable to get expert assistance for this process. Also, the IT department will scrutinise your application, activity report, and audited statement before approving your application. To make the registration process easy and efficient, reach out to Vakilsearch. Then, let us handle the filing of your 80G application. Our legal representatives will arrange all the necessary documentation and apply your?process of ITR filing.?

How to Claim the Deduction Under Section 80G?

To claim this deduction, you must provide the following information in your income tax return:

• Name of the recipient (donee)
• PAN (Permanent Account Number) of the recipient (donee)
• Address of the recipient (donee)
• Contribution amount, specifying the breakdown of cash and other modes of payment
• The amount eligible for deduction

These details should be mentioned in the respective tables provided in the ITR (Income Tax Return) form:

• Table A: For donations eligible for 100% deduction without a qualifying limit
• Table B: For donations eligible for a 50% deduction without a qualifying limit
• Table C: For donations eligible for 100% deduction subject to a qualifying limit
• Table D: For donations eligible for a 50% deduction subject to a qualifying limit

Documents Required to Claim a Tax Deduction on Donations

To claim tax deduction under Section 80G, taxpayers must possess the following supporting documents:

• Duly stamped receipt: It is essential to obtain a receipt from the charity or trust to which the donation amount is given. The receipt should include important details like your name, address, donated amount, PAN number of the trust, etc.
• Form 58: If the donor intends to claim a 100% deduction, Form 58 is required to be submitted.
• Trust registration number: All eligible trusts under Section 80G are assigned a registration number by the Income Tax Department. Donors should ensure that the receipt includes the trust registration number.

How Does Deduction Under Section 80G Benefit Different Types of Taxpayers?

The tax benefit for Mr. S and M/s. P Pvt. Ltd. will depend on their applicable tax rates. Let’s consider a different example with the following details:

Mr. A is an individual and M/s. Q Pvt. Ltd., a company, donates Rs 2,00,000 to a charitable organization. The total income for the assessment year 2021-22 (AY 2021-22) of both Mr. A and M/s. Q Pvt. Ltd. is Rs 10,00,000. The tax benefit is as shown in the table:

Particulars:?

• Mr. A M/s. Q Pvt. Ltd.?
• i) Income for the financial year 2021-22 10,00,000 10,00,000
• ii) Donation made to NGO 2,00,000 2,00,000?
• iii) Qualifying amount for deduction (50% of the donation made) 1,00,000 1,00,000
• iv) Amount of deduction u/s 80G (gross qualifying amount subject to a maximum limit of 10% of the gross total income) 1,00,000 1,00,000
• v) Taxable income after deduction 9,00,000 9,00,000 A. Tax payable after considering the donation
• Mr. A’s tax was calculated as per the income tax slab rate
• M/s. Q Pvt Ltd.’s tax calculated at 30% 1,32,500 5,40,000 B. Tax payable before donation 1,50,000 6,00,000 C. Tax Benefit from Section 80G deduction 17,500 60,000