Making donations is a noble task; it is not only recognized by god, but also by the taxation departments. Obtaining 80G Registration for your non-profit organization can grant the donors a chance to avail tax deductions on donations. Additionally, obtaining 80G Certificate can also help increase the total count of donations your non- profit organization collect. This article all about 80G Registration and the advantages of holding an 80G Certificate.
What is 80G Registration?
80G Registration or 80G Certificate is a certificate that allows the people making donations in your organization to avail tax deductions under Section 80G of Income Tax Act, 1961. Furthermore, religious charities or angel businesses are not generally issued an 80G Certificate. Moreover, gifts made to or trusts that are operating outside India or foreign trusts are not eligible for tax deductions.
Benefits of 80G Registration
Obtaining 80G Registration has many advantages which are discussed below in detail;
- Tax benefits: You are provided with various tax benefits when your institution is registered under Section 80G
- Attract more donors: Also, obtaining 80G Registration attract more donors as they get tax deductions under Section 80G of the Income Tax Act
- Better access to funding: Furthermore, the chances for your trust to raise funds increases when you hold 80G Registration
Who can avail tax savings under Section 80G?
The following category of people can claim deductions under Section 80G of the Income Tax Act;
- A person who makes a donation in the prescribed mode of payment can avail tax exemption under 80 G
- Furthermore, donations made to listed trust and organizations only qualify for deduction under Section 80G
Who can not avail tax savings under Section 80G?
Also, a specific group of people are not entitled to take advantage of these deductions under specified circumstances. The conditions under which tax deductions are not available are as follows;
- You are not qualified for tax savings under section 80G if a donation is made to a foreign trust
- If you make donations in one or more political parties, you cannot claim a deduction for such contributions.
- Also, you cannot avail deductions for printing or publishing of brochures, pamphlets and flyers
- Donations by a Non-Resident Indian made to eligible institutions and trusts also qualify for tax exemption under section 80G
- If a donation is made from salary and if the receipt carries the name of the employer then the employee can claim deduction under section 80G
Deduction percentage under Section 80G
Deductions are provided to the taxpayers in some percentage as prescribed by relevant law.
- Donations made to Prime minister relief fund is eligible for 100% deduction under section 80G without any upper limit
- Payments made to trusts like “Indira Gandhi memorial trust” is suitable for 50% deduction without any specified limit
- An approved institution, i.e. institutions encouraging and promoting family planning is eligible for 100% exemption under section 80G
- Any charitable trust that is included in the list is suitable for 50% deduction under section 80G
Documents required to claim deductions under Section 80G
The documents required to register under Section 80G of the Income Tax Act are as follows;
- A copy of PAN Card (NGO)
- Duly filled Form 10G
- Trust Deed / MOU
- Summary of welfare activities carried in the preceding three years
- Balance sheet and books of accounts of the previous three years
- List of donors along with their address and PAN
- List of the governing board of trustee’s members with their contact details
- Original Registration Certificate
For Proposed Registered office (Residential or commercial)
- Any Utility bills
- Scan copy of Rent agreement with NOC from owner
Mode of payment that is eligible for a tax deduction
Not all form of payment is qualified for claiming tax deductions under Section 80G. Furthermore, only a specified method of payment is allowed for the deductions which are as follows;
- Donations made in the form of gifts do not qualify for tax benefits
- Also, the donations made in kind will not help you with tax benefits during a disaster such as floods, earthquake
- Contributions deducted from salary can be claimed by providing the receipt received at the time of payment
- Only cash or cheque donations qualify for a tax deduction
Compliance requirements for 80G Registration
The applicant of the 80G Registration must comply with the following conditions;
- An application can only be made by registered societies, public charitable trusts, recognized educational institution or any institution funded by the Government
- The institution or trust applying for the Certificate must be duly registered under the Society Registration Act, 1860, Section 25 of the Companies Act or under any other relevant laws.
- Applicants of the Certificate must not correspond to any religion-based or caste and creeds based activity.
- The donated funds received by these trust/ institution should only be used for charitable purposes
- The registered trust should not hold any income which is not exempted
- Institutions pursuing any other businesses side- by- side are required to maintain a separate book of accounts so that the received donations are not confused with savings of any other kind
- The applicant should manage an appropriate record of filing annual returns, accounting and bookkeeping before applying for the Certificate.
- Lastly, the recipient of the Certificate must ensure timely renewal of licenses which will help the donors to receive associated tax benefits
Time Limit of Passing Order
Under section 80G (5) the order that grants approval or rejects the application shall be passed within the six months time period from the month’s end in which the application was received.
In calculating the period of six months, the time taken by the applicant in not abiding with the Commissioner’s directions shall be excluded.
Step by step Procedure for 80G Registration
Given below are the steps that you need to follow to obtain the 80G Certificate for your institute;
- Submit the application for 80G Certificate to the Commissioner of Income Tax along with relevant documents
- After successful submission of application and documents, the Income Tax Department will conduct an On-premise inspection
- The department officials may ask for additional documents or evidence if they feel the need for the same
- After satisfactory verification of the premise and the documents, the 80G Certificate is issued to the institution
80G Certificate issuance
Upon the receipt of the application, the Commissioner will pass a written order upon successful verification of the application which would effectively register the trust/ institution under Section 80G of the Income-tax Act.
Also, the Commissioner may demand further documents from the applicant if the need for the same is felt, or reject the application in the worst case. The Registration accorded to the trust is valid for a period of one-three years.
Obtaining 80G registrations is helpful to you in many ways; it helps attract more donors, builds trust and helps raise fund from the Government. Also, it helps the people who make donations to your trust can avail some or all part of the donation made. Basically, it is a win-win situation.
Read our article:Tax Exemption for NGOs: Section 12A & 80G