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Income Tax : Deduction U/s 80 G of Income Tax Act 1961

Registration under section 80G of Income Tax Act provides benefit to NGOs. If NGO has 80G certificate with them, donor gets financial benefit in his/her taxable amount of their income. If an NGO gets itself registered under section 80G then the person or the organization making a donation to the NGO will get a deduction of 50% from his/its taxable income. By availing 80G Certificate, NGO can attract more donors.

REGISTRATION UNDER SECTION 80G

If an NGO gets itself registered under section 80G then the person or the organisation making a donation to the NGO will get a deduction of 50% from his/its taxable income. The NGO has to apply in Form No. 10G As per Annexure - 29 to the Commissioner of Income Tax for such registration. Normally this approval is granted for 2-3 years.

DOCUMENTS TO BE FILLED WITH FORM 10G

The application form should be sent in triplicate to the Commissioner of Income Tax alongwith the following documents :

i) copy of income tax registration certificate.

ii) detail of activities since its inception or last three years whichever is less

iii) copies of audited accounts of the institution/NGO since its inception or last 3 years whichever is less.

Section 80G of the Income Tax Act,1961 permits donors to Societies Registered U/s 80G benefits of income tax exemption on their donation. This is one of the incentive provided for the people to donate for a noble cause.As such, all NGO should try and obtain registration under section 80G. This is one way in which the NGO can express their gratitude to the donors.

Section 80G of the Income Tax Act enables an Income Tax Payee to claim deduction for donation made by them to certain organisation. This deduction is subject to certain conditions.

The amount of deduction depends on-

a). To whom the donation has been made.

b). The amount of donation. They are exempted from 100% to 50% of the amount of donation.

No. All donations are not eligible for deduction of U/s 80G. Only those donations qualify which is made to certain funds, charitable institutions registered or mentioned under U/S 80G.

a). Several Institutions of National importance such as-

National Defence Fund.

Prime Minister’s National Relief Fund.

Prime Minister’s Drought Relief Fund etc.

Are expressly mentioned in the Section 80G. Any donation to them quality for deduction U/s 80G by the Donor.

b). The Chief Commissioner of Income Tax can approve institutions under this section. Earlier Religious Institutions were expressly not allowed to be registered U/s 80G. However, those organisation whose expense were not related to religious activities were allowed. Currently, those religious organisations which spent an amount not exceeding 5% of its gross income towards religious activities, are also eligible to be registered.

NGO should take following steps after receiving donation u/s 80G

1. Issue Receipt to donor: Recipient NGO must issue a receipt for donation received u/s 80G. The receipt must contain the name and address of the NGO along with Registration Number allotted by Income Tax Department, the name of the donor, the amount donated (please ensure that the amount written in words and figures tally with each other).

2. Produce photocopy of 80G certificate: NGO should give Xerox copy of 80G Certificate to donor along with the receipt of donation if it is demanded by donor.

3. Only donations in cash/cheque are eligible for the tax deduction: Donations in kind do not entitle for any tax benefits. For example, during natural disasters such as floods, earthquake, and many organizations start campaigns for collecting clothes, blankets, food etc. Such donations will not fetch donor any tax benefits.

Benefit to donors

If aggregate of the sums donated exceed 10% of the adjusted gross total income, the amount in excess of 10% ceases to be entitled for tax benefit. (NGO should inform this benefit to their donors)