tax benefits to NGO

NGO can avail income tax exemption by getting itself registered and complying with certain other formalities, but such registration does not provide any benefit to the persons making donations.

The Income Tax Act has certain provisions which offer tax benefits to the "donors". All NGO's should avail the advantage of these provisions to attract potential donors. Section 80G is one of such sections.

 The persons or organization who donate under section 80G gets a deduction of 50% from their taxable income. Here at times a confusion creeps in, that the tax advantage under section 80G is 50%, but actually it is not so. 50% of the donation made is allowed to be deducted from the taxable income and consequently tax is calculated.

 

Dear sir,

Appropriate course of action would be to register the institution with CIT (Exemption) u/s 12AA.

As per Section 2(15) "charitable purpose” includes advancement of any other object of general public utility:

Further as per Section 10(23B) any income of an institution constituted as a public charitable trust or registered under the Societies Registration Act, 1860  existing solely for the development of khadi or village industries or both, and not for purposes of profit, to the extent such income is attributable to the business of production, sale, or marketing, of khadi or products of village industries is exempt.

Provided that—

       (i)  the institution applies its income, or accumulates it for application, solely for the development of khadi or village industries or both; and

      (ii)  the institution is, for the time being, approved for the purpose of this clause by the Khadi and Village Industries Commission.

Further, purchaser of merchandise shall not be eligible to claim deduction u/s 80G. As the transaction entered is of purchase of goods. It does not partake charchter of donation.