Tax Exemption: Steps for Getting an 80G Certificate

Last Updated at: March 06, 2020
93630
Latest Update

 

On March, 2020:

As provisioned in Budget 2020, every charitable trust or institution registered u/s 80G will need to submit a statement of donations received in the form & manner prescribed. The benefit of 80G shall be available to donors based on information of donation so furnished by the corresponding charitable trust or institution.

Tax Exemption: Steps for Getting an 80G Certificate
News Update: On Feb 2020:

As per the latest provisions in Budget 2020, every charitable trust or institution registered u/s 80G will need to submit a statement of donations received in the 90G form & manner prescribed. The benefit of 80G shall be available to donors on the basis of information of donation so furnished by the corresponding charitable trust or institution.

 

Under the Income Tax Act, certain contributions or donations are eligible for a tax deduction under Section 80G. NGOs or other non-profits must apply for registration and are intensely scrutinised by the IT Department before being granted such a certification. This is because such institutions tend to attract a larger number of donations from corporates and individuals looking to give to charity while saving on tax. In this article, let us know about form 80G, what is 80G certificate and how to get 80G certificate, 80G registration steps, etc.

Eligibility for 80G exemptions

Only donations made to charities prescribed under category 80G are eligible for an 80G deduction and 80G registration. Charities with a religious or business angle are not typically granted 80G certification. Also, gifts made to trusts operating outside India (a foreign trust) are not eligible for a tax deduction.

Similarly, if you are donating for a private trust, which is not registered under 80G certification or have given any funding for a political party, you cannot avail of tax exemption for the amount donated. It will be computed as your taxable income.

Tax deductions under 80G

There are some funds which are specified under 80G; wherein the taxpayer is eligible for an exemption. However, there are certain specifications as to the mode of payment, the percentage eligible for deduction and so on.

File your taxes today

Payment Mode:

The 80G of the Income Tax Act declares that contributions to the funds should be made in the form of cheques or demand drafts. In case of a cash contribution, the amount should be below Rs. 10,000 for it to be eligible for a tax deduction.

Any contributions made in kind, like clothes, gift items or food, cannot be claimed as a donation for tax exemption.

Percentage of contribution eligible for deductions

Not all funds come under 80G category. Even then, only donations to individual funds receive a 100% tax exemption for the amount paid. The others are only categorised for 50% tax exemption.

Here is the complete list of funds which are eligible for either a 100% or 50% tax exemption.

Any other donations to the trust or NGO that are not specified in the list, and which do not have an 80G certification, are not eligible for tax exemption.

It is, therefore, essential for trusts and NGOs or welfare societies which are looking for donations from fellow citizens to go ahead and apply for an 80G certification.

Documentation Required as Proof

If you have donated towards a fund or a charitable institution with an 80G certificate, you are required to submit, apart from the usual documents for filing returns, the following:

Stamped Receipt: A stamped receipt for the donations made. Whenever a donation is made towards a fund or a trust, they must give a receipt. Keep it safe, and submit it while filing tax to get an exemption for the amount. The receipts should contain the stamp of the organisation, name, date and PAN Number.

Form 58: For donations made towards funds with 100% exemptions, a Form 58 from the organisation is also necessary.

The receipt should also contain the registration number (80 G certificate number). The receipts from the registered organisations always have the number printed on them. However, if you cannot locate it on the receipt, ask for it to file for tax exemption.

Applying for 80G Certificate

An 80G certification is one that is granted to certain not-for-profit organisations by the Income Tax Department, granting their donors the ability to avail of a tax deduction on donations.

To apply for an 80G certificate, however, the organisation must first have a 12A certificate. Only NGOs and non-profitable institutions with a 12A certificate are eligible for 80G certification.

To get an 80G certificate, the organisation has to fill in Form 10G and attach its activity report for the past one to three years, with an audited statement for the past three years, or even from the date of establishment in certain cases. The form 80G registration is available on the IT department website. After scrutinising your application, the activity report and audited statement, an IT officer will pay a visit to your premises for an inspection.

Eligibility for 80G Certification

Not all NGOs or trusts are eligible for 80G certification. There are certain rules which need to be followed to obtain it. Here are the details under which the government can reject your claim for an 80G certification.

1. Separation of Business & Charity: As a non-profit organisation, if the entity is involved in any business/financial transactions which do not account for donations alone, you might have to segregate it. If not, your 80G certification request will be rejected.
2. No Misuse: The donations received so far, towards the cause should not be misused on any account or used for any other purpose, even within the organisation. A strict accounting is essential to show as proof.
3. No Religious Activity: Any NGO/Trust, which is operated as a part of an activity which involves religious preaching, or for a particular caste or creed is not eligible for 80G certification.
4. Proper Accounting: As mentioned earlier, the accounting books and all transactions should be kept as proof before applying for 80G. These documents will be scrutinised thoroughly before 80G certification is issued.

Tax Benefits to the Organisation

The 80 G certification not only provides the donors with a tax exemption on the amount donated (depending upon the annual income of the donor), but also gives tax benefits to the non-profitable organisation.

The institution can get an exemption of 10% for the gross income earned through donations and contributions. Moreover, the Income Tax Department has the power to approve or reject such approval upon disqualification of the non-profit organisation or dissatisfaction found by the department towards the NGO’s activities.

Indeed, the primary role of 80G certification is to encourage donors to donate funds to the non-profit organisation. With the certification, donors can save reduce their tax liability by up to 10% for 50% of the amount donated.

Requirements for 80G certificate

1. If a non-profit organisation is undertaking any business, it has to maintain a separate account and should not mix the donations they receive for a social cause.

2. Other than the charitable cause, the organisation or its bylaws should not represent any other cause. None of the donations can be spent toward anything but the charitable cause.

3. The organisation shall not be able to apply for 80G if it supports religion-based, caste- or creed-based activities.

4. The organisation should be registered under the Societies Registration Act, 1860, or registered under section 25 of the Companies Act, 1956.

However, the Income Tax Department has the power to approve or reject such approval upon disqualification of the non-profit organisation or dissatisfaction found by the department towards the non-profit organisation activities.

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Tax Exemption: Steps for Getting an 80G Certificate

93630
News Update: On Feb 2020:

As per the latest provisions in Budget 2020, every charitable trust or institution registered u/s 80G will need to submit a statement of donations received in the 90G form & manner prescribed. The benefit of 80G shall be available to donors on the basis of information of donation so furnished by the corresponding charitable trust or institution.

 

Under the Income Tax Act, certain contributions or donations are eligible for a tax deduction under Section 80G. NGOs or other non-profits must apply for registration and are intensely scrutinised by the IT Department before being granted such a certification. This is because such institutions tend to attract a larger number of donations from corporates and individuals looking to give to charity while saving on tax. In this article, let us know about form 80G, what is 80G certificate and how to get 80G certificate, 80G registration steps, etc.

Eligibility for 80G exemptions

Only donations made to charities prescribed under category 80G are eligible for an 80G deduction and 80G registration. Charities with a religious or business angle are not typically granted 80G certification. Also, gifts made to trusts operating outside India (a foreign trust) are not eligible for a tax deduction.

Similarly, if you are donating for a private trust, which is not registered under 80G certification or have given any funding for a political party, you cannot avail of tax exemption for the amount donated. It will be computed as your taxable income.

Tax deductions under 80G

There are some funds which are specified under 80G; wherein the taxpayer is eligible for an exemption. However, there are certain specifications as to the mode of payment, the percentage eligible for deduction and so on.

File your taxes today

Payment Mode:

The 80G of the Income Tax Act declares that contributions to the funds should be made in the form of cheques or demand drafts. In case of a cash contribution, the amount should be below Rs. 10,000 for it to be eligible for a tax deduction.

Any contributions made in kind, like clothes, gift items or food, cannot be claimed as a donation for tax exemption.

Percentage of contribution eligible for deductions

Not all funds come under 80G category. Even then, only donations to individual funds receive a 100% tax exemption for the amount paid. The others are only categorised for 50% tax exemption.

Here is the complete list of funds which are eligible for either a 100% or 50% tax exemption.

Any other donations to the trust or NGO that are not specified in the list, and which do not have an 80G certification, are not eligible for tax exemption.

It is, therefore, essential for trusts and NGOs or welfare societies which are looking for donations from fellow citizens to go ahead and apply for an 80G certification.

Documentation Required as Proof

If you have donated towards a fund or a charitable institution with an 80G certificate, you are required to submit, apart from the usual documents for filing returns, the following:

Stamped Receipt: A stamped receipt for the donations made. Whenever a donation is made towards a fund or a trust, they must give a receipt. Keep it safe, and submit it while filing tax to get an exemption for the amount. The receipts should contain the stamp of the organisation, name, date and PAN Number.

Form 58: For donations made towards funds with 100% exemptions, a Form 58 from the organisation is also necessary.

The receipt should also contain the registration number (80 G certificate number). The receipts from the registered organisations always have the number printed on them. However, if you cannot locate it on the receipt, ask for it to file for tax exemption.

Applying for 80G Certificate

An 80G certification is one that is granted to certain not-for-profit organisations by the Income Tax Department, granting their donors the ability to avail of a tax deduction on donations.

To apply for an 80G certificate, however, the organisation must first have a 12A certificate. Only NGOs and non-profitable institutions with a 12A certificate are eligible for 80G certification.

To get an 80G certificate, the organisation has to fill in Form 10G and attach its activity report for the past one to three years, with an audited statement for the past three years, or even from the date of establishment in certain cases. The form 80G registration is available on the IT department website. After scrutinising your application, the activity report and audited statement, an IT officer will pay a visit to your premises for an inspection.

Eligibility for 80G Certification

Not all NGOs or trusts are eligible for 80G certification. There are certain rules which need to be followed to obtain it. Here are the details under which the government can reject your claim for an 80G certification.

1. Separation of Business & Charity: As a non-profit organisation, if the entity is involved in any business/financial transactions which do not account for donations alone, you might have to segregate it. If not, your 80G certification request will be rejected.
2. No Misuse: The donations received so far, towards the cause should not be misused on any account or used for any other purpose, even within the organisation. A strict accounting is essential to show as proof.
3. No Religious Activity: Any NGO/Trust, which is operated as a part of an activity which involves religious preaching, or for a particular caste or creed is not eligible for 80G certification.
4. Proper Accounting: As mentioned earlier, the accounting books and all transactions should be kept as proof before applying for 80G. These documents will be scrutinised thoroughly before 80G certification is issued.

Tax Benefits to the Organisation

The 80 G certification not only provides the donors with a tax exemption on the amount donated (depending upon the annual income of the donor), but also gives tax benefits to the non-profitable organisation.

The institution can get an exemption of 10% for the gross income earned through donations and contributions. Moreover, the Income Tax Department has the power to approve or reject such approval upon disqualification of the non-profit organisation or dissatisfaction found by the department towards the NGO’s activities.

Indeed, the primary role of 80G certification is to encourage donors to donate funds to the non-profit organisation. With the certification, donors can save reduce their tax liability by up to 10% for 50% of the amount donated.

Requirements for 80G certificate

1. If a non-profit organisation is undertaking any business, it has to maintain a separate account and should not mix the donations they receive for a social cause.

2. Other than the charitable cause, the organisation or its bylaws should not represent any other cause. None of the donations can be spent toward anything but the charitable cause.

3. The organisation shall not be able to apply for 80G if it supports religion-based, caste- or creed-based activities.

4. The organisation should be registered under the Societies Registration Act, 1860, or registered under section 25 of the Companies Act, 1956.

However, the Income Tax Department has the power to approve or reject such approval upon disqualification of the non-profit organisation or dissatisfaction found by the department towards the non-profit organisation activities.

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.