80G is a certificate of tax exemption that you got when you made donations to charitable trusts or organizations that are registered under section 12 A.
There is, however, a criterion for the maximum permissible deduction. The rule is “if the overall donation amount exceeds 10% of the total gross income, then the excess amount will not eligible for any tax benefit”. 80G certificates are a vital tax-saving certificate.
Who is not eligible for tax savings under 80G?
- A person who avails a provisionary donation can get tax exemption under 80G.
- Donations made to certified trust can only qualify for deduction u/s 80G.
- A donation by NRI is made to eligible institutions and trusts avail the tax exemption under section 80G.
- If the donation is made by the salaried person.
Who is not eligible for tax savings under section 80G?
- If a donation serves foreign trust.
- If donations have been made to political parties or for printing or publishing of brochures, flyers, and pamphlets.
Section 80G – Percentage of Deduction
- 100% deduction u/s 80, if the donation is made to the prime minister relief fund
- 50% deduction in case if the contribution made to the trusts like “Indira Gandhi memorial trust.”
- An approved institution that promotes family planning is eligible for 100% exemption u/s 80G.
- Any charitable trust is eligible for 50% deduction u/s 80G.
Documentation Needed For Claim Deductions under 80G.
- A stamped receipt is imperative for the claim of deduction under section 80G. The receipt has to be issued by the recipient trust. The receipt should contain the detail like
- Name, address & PAN number for the trust.
- The amount donated ought to clearly cited in numeric as well as words.
- Donations are the best source of tax exemption and attract 100% deduction – in such circumstances; form 58 should also be asked from the trust
- Form 58 comprises the authorized amount as well as the amount that was raised.
- Without presenting form 58, the deductions claims will be rejected.
- Registration number of the trust under 80G
- The registration number issued by the income tax department[1] and it should be printed on the receipt.
- The registration is issued by the income tax department stay valid for two years only. Therefore, the registration number and the validity should also be mentioned on the receipt.
Mode of Payments comply with Tax Deduction.
- Donations made as gifts don’t come under the category of tax exemption or benefits. During a disaster such as floods, the donations will not help you avail of the tax exemption.
- Only cheque donations and cash qualify for the tax exemption.
- Salary can act as a source of the donation, and its receipt should be obtained on the name of the employer. This will give you access to exemptions under section 80G.
Read our article:Charitable Institutions Related Changes u/s 12A/12AA and 80G-Budget 2020
80G Registration – Compliance Requirements
The applicant of the 80G registration must comply with the provisions stipulated below:
- The application can only be made by a recognized educational institution or a Government-funded institute.
- The trust/institution must be duly registered under Section 25 of the Companies Act; or any other relevant Acts.
- Applicants must not represent any caste and creeds based activity.
- The utilization of the donated funds should be done for charitable purposes.
- The registered trust/institution should avoid the possession of the income, which is not exempted.
- The separate account must be created for the other businesses to impart better transparency on the movement of donations.
- The appropriate maintenance of annual returns, accounting and bookkeeping, must be practiced before applying for the certificate.
- To avail of the eligible tax benefits, the recipient must ensure the timely renewal of certificates.
Process of obtaining 80G registration
As soon as the Commissioner of Income Tax obtain the Form 10G from the applicant, the processing of registration get initiated. Here are the following documents one needs to attach with the form 10G.
- Registration Certificate
- MOA /Trust Deed
- NOC from the landowner where the registered office is established.
- Xerox of the Pan Card.
- Xerox of the electricity bill, water bill, or house tax receipt.
- Proof of the activities pursued in the context of the welfare.
- Progress Report for the previous 3 years.
- Account details and balance sheet for the last 3 years.
- List of contributors (with their address and PAN).
- List of the governing body of trustees with their contact details.
- Copy of registration (section 12A() or copy of notification (10(23)or section 10(23C)
Issue of Certificate
On receipt of the application, the Commissioner may pass a written order which would effectively register the trust/institution under Section 80G of the Income-tax Act. If necessary, the Commissioner can demand further documents from the applicant. In addition, the Commissioner is entitled to reject the application if the need for the same is felt. The registration granted to the trust will be valid for one-three years.
Salient features of Section 80G:
Section 80G deductions turn out to be active when an assessee donates to the trust that works under the provision of tax law.
Now, as far as the eligibility criteria for the deduction is a concern, every individual assesse, firms and so on, can claim the benefit, provided they have ample proof in the form of statements presented for the donations.
There is, however, an exception when it comes to the mode of payment.
- The cheque, demand drafts, or cash is the only mode of donation.
- Rs 10000 is the limit imposed on the person who chooses to make the payment via cash.
- Any donations made in the form of food, materials, clothing, and so on do not come under Section 80G.
Read our article:Tax Exemption for NGOs: Section 12A & 80G
