Maximizing Tax Benefits for Donors: A Comprehensive Guide to Section 80G Registration

Introduction

Non-Governmental Organizations (NGOs) have the opportunity to attain income tax exemption through registration and compliance with specific formalities. However, it’s important to note that such registration does not directly benefit individuals or entities making donations. The Income Tax Act includes provisions aimed at encouraging donations by offering tax benefits to donors. It is crucial for NGOs to effectively utilize these provisions to attract potential donors, with Section 80G being a key aspect

Procedure

Under Section 80G, when an NGO registers, donors can claim a deduction of 50% from their taxable income upon donating.
Previously, registration under Section 80G was a one-time process, unless specific restrictions were mentioned in the registration certificate. However, significant changes were introduced by the Finance Act 2020 concerning the registration process and approval period.

New Registrations

NGOs seeking fresh registration under Section 80G must apply to the Principal Commissioner or Commissioner. Upon approval, provisional registration valid for three years from the Assessment Year of registration is granted. Applications for renewal of such registrations must be submitted:

• At least six months before the expiry of the current validity period, or
• Within six months from the commencement of activities, whichever is earlier.

Existing Registration – Validation & Re-approvals

Previously, 80G approvals were indefinite. The Finance Act 2020 mandates the revalidation of all existing approvals. Applications for revalidation were required to be submitted by June 30, 2021, for approvals valid for five years. Renewals must be applied for at least six months before the expiry date.

Forms and TimelinesProcedure for Registration

Procedure for registration

• Log on to the E-filing portal of IT department vide https://www.incometaxindiaefiling.gov.in/home
• Go to “Income Tax Forms” under e-File tab.
• Select the Form Name as “Form 10A” and relevant Assessment Year from the drop down list.
• Select the option of “Prepare and Submit Online” in submission mode.
• Fill in the details as required in the form and attach the required and applicable attachments.
• Submit the form using digital signatures or EVC as required while return filing.

Documents Required with Form 10A/10AB

• Self-certified copy of incorporation document
• Self-certified copy of registration with relevant Registrar
• Self-certified copy of FCRA registration (if applicable)
• Self-certified copy of existing approval under section 10(23C)
• Copies of annual accounts for up to three preceding years
• Copies of audit reports under section 44AB (if applicable)
• Details of activities since inception or the last three years, whichever is shorter

Conditions under Section 80G

For approval under Section 80G the following conditions are to be fulfilled :

• Not generate income from sources other than those exempted, such as business income. If business income exists, separate accounting books must be maintained, and donations meant for business purposes must not be diverted.
• Ensure that their bylaws or objectives do not permit the spending of income or assets on purposes other than charitable ones.
• Not work exclusively for the benefit of any particular religious community or caste.
• Maintain regular accounts of receipts and expenditures.
• Be duly registered under the Societies Registration Act 1860, or under any corresponding law, or under section 8 of the Companies Act 2013.

Mandatory Requirement of Darpan ID

Organizations applying for 80G registration must provide their Darpan portal details. This requirement is mandatory for entities receiving grants from either the Central or State Governments.

Issuance of Certificate

Upon submission of the application under Form 10A, the PCIT or CIT will issue approval in writing in Form No. 10AC, along with a unique sixteen-digit alphanumeric Unique Registration Number (URN). Additional documents may be requested, or the application may be rejected following due process.

For Form 10AB, registration, rejection, or cancellation is communicated in Form No. 10AD, with a URN issued upon approval. Further documentation may be requested to verify the activities and compliance of the trust or institution.

Extent of Benefit

Donors can deduct up to 50% of their donations from their taxable income, subject to a limit of 10% of their Gross Total Income under Section 80G. Cash donations exceeding Rs. 2,000 must be made through non-cash modes.

Penal Provisions

Failure to furnish donation certificates or statements can lead to penalties under section 271K, ranging from Rs. 10,000 to Rs. 1,00,000.

In summary, the timelines and procedural details for granting, renewing, and validating Section 80G registrations are critical to ensuring compliance and transparency in charitable contributions under the Income Tax Act.