Approval of an Institution or Fund under section 80G of the Income Tax Act, 1961

CA SATISH KUMAR N , Last updated: 08 July 2018
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Rule 11AA of the Income Tax Rules deal with Requirements for Approval of an Institution or Fund under section 80G of the Income Tax Act, 1961.

Rule 11AA: (Procedure for Approval):

(1) The application for approval of any institution or fund under clause (vi) of sub-section (5) of section 80G shall be in Form No. 10G and shall be made in triplicate.

(2) The application shall be accompanied by the following documents, namely:

(i)		Copy of registration granted under section 12A or copy of notification issued under section 10(23) or 10(23C) ;
(ii)		Notes on activities of institution or fund since its inception or during the last three years, whichever is less ;
(iii)		Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less.

(3) The Commissioner may call for such further documents or information from the institution or fund or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of such institution or fund.

(4) Where the Commissioner is satisfied that all the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are fulfilled by the institution or fund, he shall record such satisfaction in writing and grant approval to the institution or fund specifying the assessment year or years for which the approval is valid.

(5) Where the Commissioner is satisfied that one or more of the conditions laid down in clauses (i) to (v) of sub-section (5) of section 80G are not fulfilled, he shall reject the application for approval, after recording the reasons for such rejection in writing :

Provided that no order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard.

(6) The time limit within which the Commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the [end of the month in] which such application was made :

Provided that in computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner under sub-rule (3) shall be excluded.

Form 10G and its Contents:

Form 10G is the application for Approval or continuance thereof to any Institution or Fund under clause (vi) of sub-section (5) of section 80G and shall be made in triplicate.

This form has various clauses as detailed here under:

1. Name of the institution/fund in full (in block letters)

2. Address of the registered office of the institution/fund

3. Legal status [please specify whether the institution/fund is-

(i) constituted as public charitable trust;

(ii) registered under the Societies Registration Act, 1860 (21 of1860) or under any law corresponding to that Act in force in any part of India;

(iii) registered under section 25 of the Companies Act, 1956 (1 of 1956);

(iv) a University established by law;

(v) any other educational institution recognised by the Government or by any University established by law or affiliated to any University established by law;

(vi) an institution wholly or partly financed by the Government or a local authority;

(vii) an institution established with the object of controlling, supervising, regulating or encouraging games or sports and is approved for this purpose under section 10(23); or

(viii) a Regimental Fund or Non -Public Fund established by the armed forces of the Union for the welfare of past or present members of such forces or their dependants.]

4. Objects of the institution/fund and geographical area over which its activities are undertaken

5. Names and addresses of trustees/office bearers of the institution or fund

6. (i) If registered under section 12A(a) of the Income-tax Act, the registration number and date of registration

(ii) If notified under section 10(23) or under section 10(23C) of the Income-tax Act, the details thereof

(iii) If responses to (i) & (ii) are negative, whether any application for the same has been filed? If yes, enclose a copy of the same.

7. (a) Period of last approval, if any. Please enclose a copy of the approval

(b) If any change in the aims and objects and the rules and regulations have been made since the last approval, the details thereof

8. Assessment particulars-

(a) Ward/Circle where assessed and permanent account number/GIR number

(b) Is the income exempt under section 10(22), 10(22A), 10(23), 10(23AA), 10(23C) or 11?

9. Amount accumulated for the purposes mentioned in item (4) above

10. (i) Details of modes in which the funds are invested or deposited, showing the nature, value and income from the investment;

(ii) Whether any funds have not been invested in the modes specified in section 11(5)?

11. (i) Is the institution/fund carrying on any business? If yes, give details

(ii) Is the business incidental to the attainment of its objects?

12. Details of nature, quantity and value of contributions (other than cash) and the manner in which such contributions have been utilised.

13. Details of shares, security or other property purchased by or on behalf of the trust from any interested person as specified in sub-section (3) of section 13.

14. Whether any part of the income or any property of the association was used or applied in a manner which results directly or indirectly in conferring any benefit, amenity or perquisite (whether converted into money or not), on any interested person as specified in sub-section (3) of section 13? If so, details thereof.

The form should be certified and an undertaking as below is to be given by the applicant:

“I certify that information furnished above is true to the best of my knowledge and belief. I undertake to communicate forthwith any alteration in the terms or in the rules governing the institution/fund made at any time hereafter.”

The form should also specify following details:

Place, Date, Signature, Designation of person signing the application and Address.

The application form (in triplicate) should be sent to the Commissioner of Income-tax having jurisdiction over the Institution or Fund along with the following documents:

Copy of registration granted under section 12A or copy of notification issued under section 10(23) or section 10(23C).
ii. Note on activities of institution or fund since its inception or during the last three years, whichever is less.
Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less.

Documents to be furnished:

Application in form No. 10G.
Copy of Registration granted under section 12A of the Income Tax Act,1961.
Note on activities of institution/fund since its inception.
Copies of accounts of the institution.

The commissioner may call for such further documents or information from the institution as he deems fit to satisfy himself about the genuineness of the activities of such institution. Where the commissioner is satisfied that all the conditions are fulfilled, he shall grant approval to the institution. If he is not satisfied that conditions are fulfilled, he shall reject the application for its approval. No order of rejection of an application shall be passed without giving the institution or fund an opportunity of being heard.

Time Limit for Passing the Order:

The time limit within which the commissioner shall pass an order either granting the approval or rejecting the application shall not exceed six months from the end of the month in which such application was made. In computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner shall be excluded.

Renewal of 80G Approval:

Prior to 01.10.2009, there was a requirement that before the expiry of the date as mentioned in the section 80G approval, renewal had to be sought for. However, the Finance Act, 2009 has made change in this regard. After such change, only those institutions whose expiry is due before 01.10.2009 require renewal. For the remaining cases, the approval is perpetual unless the commissioner withdraws the exemption. Therefore, there is no requirement of periodical renewal under present law.

Important Points:

It is important to note that when registration is granted under section 12A, it does not mean that section 80G approval has been given i.e. registration under section 12A will not provide automatic approval under section 80G. It has to be applied separately.
Section 80G applies only to charitable trusts or institutions. It does not apply to religious trusts or institutions whereas scheme of exemption u/s 12A applies to both charitable as well as religious trusts.
The applications for registration under section 12A and 80G can be applied together or they can also be applied separately. If trust is willing to apply both the applications separately, then an application for registration u/s 12A has to be applied first as the registration u/s 12A is must for applying for approval u/s 80G of the Income Tax Act.

Benefit of Approval u/s 80G:

The donor will get the benefit of deduction u/s 80G of the Income Tax Act'1961 while computing his total income. It provides deduction in respect of donations to certain funds, charitable institutions, etc. provided the donee gives a receipt of donation and his institution is approved under section 80G of the Income Tax Act, 1961.

Conditions to be satisfied to get Approval u/s 80G:

Section 80G (5) prescribes certain conditions to be satisfied to get the approval u/s 80G:

The Institution should be established in India for Charitable purpose.
If the Institution or fund is deriving any income, such income should not be liable to inclusion in its total income under the provisions of sections 11 and 12 or clause (23AA) or clause (23C) of section 10.
If the institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11 shall not apply in relation to such income, if:

(a) the institution or fund maintains separate books of account in respect of such business;

(b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and

(c) the institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for the purposes of such business;

(d) The instrument under which the institution is constituted shall not contain any provision for transfer or application of the income or asset for any purpose other than a charitable purpose.

(e) The institution should not be for the benefit of any particular religious community or caste.

(f) The institution should maintain regular accounts of its receipts and expenditures.

(g) The institution should either be constituted as a Public Charitable Trust or a registered society or a company registered u/s 8 of the Companies Act'2013 or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority.