Section 80G of the structured I-T Act by Indian Law allows specific donations allowed for specified charitable and relief institutions to be seen/processed as deductions from the total gross income. Section 80G is another way designed by the Government to save tax. 80G permits individuals/companies to make donations to specific charitable institutions or relief funds as approved by the Government, so as the donated part from the income would not be recognized as taxable.
The deductions under 80G can be availed by any assessee who further decides to contribute to certain charitable organizations. However, it should be noted that any donations ascertained to any political parties or foreign trusts would not be liable under 80G tax exemption.
How to pay?
The mode of payment recognized by the Government is through cheque or cash only. According to a recent release by the Income Tax department (for the year 2018-2019), any individual can avail a maximum deduction of 2000 INR, only made through cash. However, it should be noted that there is no maximum limit on the deduction amount when the payment is processed through cheque. It is advised that the amount to be transferred should be decided after cross-checking the upper limit of the charitable institution. Therefore, choose the recipient of your charity with care or consider a piece of expert advice (CA or any other Legal Advisory Firms) if necessary.
Deductions without an upper limit: It should be noted that the “without upper limit” clause is only applicable when the donor is able to claim 50 or 100% of the whole donation amount. Few examples are National Defence Fund and the Prime Minister's National Relief Fund which are set up by the central government. These charitable funds don’t have any upper limit and hence the whole 100% deduction is applicable. Any individual can easily claim a 100% deduction on the donation he/she has made.
How to register for the 80G certificate in order to get a tax exemption?
The exemption under section 80G is applied through the form entitled as 10G. The form can be downloaded through the income tax website. The validity of the 80G certificate was only valid for a certain period i.e. from one-to-three years but since 2014, the policy got renewed to a lifetime validity of the 80G certificate. This means that there is no renewal required.
Requirements for getting an 80G certificate:
- NGO should not have any source of income as it is the eligibility criteria for getting an 80G tax exemption.
- Objective and bylaws of the NGO should not have any provisions for spending the income received through donations on personal interests/business purposes and other outside asset acquisitions. The objectives of the NGO should match with the Trust Deep or Rules of Association.
- NGOs to receive the donations should not be dedicated to the benefits of any religious community or caste.
- NGOs must have receipts & expenditures records so as clarity on the expenses can be gained. This eases the whole 80G certificate process.
- The NGOs entitled to receive the donations should be registered under the Societies Registration Act 1860 or under any law that comprehends to the Act mentioned. This can also be checked through the list detailed under section 25 of the Companies Act 1956.
Important Note: Whenever you are deciding to make donations, it is advisable to check the background of the Trustees involved, as there are cases reported where the board members of certain NGOs were caught extracting monetary benefits through donations. This usually creates a dent in the 80G certificate registration process and at times, people have to wait to re-apply.
Documents required to be submitted for obtaining an 80G certificate:
- Duly filled 10G (registration) and 80G form
- MOA/Trust Deed and Registration Certificate
- No objection certificate obtained from Landlord
- NGO PAN card copy
- Photocopy of House Tax receipt/Electricity Bill/Water Bill
- Progress report of NGO (3 years minimum tenure)
- Annual reports of the last 3 years of NGO
- List of donors along with their identity cards.
- List of Trustee members along with their identity cards photocopy.
- Original ROC, Trust Deed/MOA copy required for verification purposes.
- Any other Affidavit required or as asked by the Registrar.
Final Verdict: The 80G certificate prepares every individual for a sustainable contribution and gets acknowledged in the eyes of law. It is a relevant and required financial practice if adopted and followed carefully from time to time.