A 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.
If an NGO gets itself, registered under section 80G then the person or the organisation making a donation to the NGO will get a deduction of 50% from his/its taxable income. The NGO has to apply in Form No. 10G to the Commissioner of Income Tax for such registration.
Earlier registration under 80G was given as one time registration unless any specific restrictions are provided in the registration certificate itself but finance act 2020 has made some substantial changes in registration process and period for which approval will be given.
Any new application for registration made on or after 1st June 2020 (as amended by finance Act, 2020) shall be approved only for a period of 3 years and thereafter approval for 80G needs to be reapplied at least 6 months prior to the validity period. The subsequent approval shall be valid for five years.
Presently the approval u/s 80G is valid for perpetuity. The Finance Bill 2020 provides that all the existing 80G approvals needs to be revalidated and the application for the same should be submitted within three months from the date on which the proposed amendment come into force(i.e. 1st June 2020). The re approvals will be valid for a period of 5 years and thereafter approval for 80G has to be again applied for at least 6 months prior to the validity period.
The application form should be sent in triplicate to the Commissioner of Income Tax alongwith the following documents :
For approval under section 80G the following conditions are to be fulfilled :
On receipt of the application, the Commissioner may pass a written order which would effectively register the trust/institution under Section 80G of the Income-tax Act. The Commissioner is also entitled to demand further documents from the applicant if the need for the same is felt, or reject the application. The registration accorded to the trust will be valid as per the new provisions of act amended through Finance Act 2020.
There is ceiling limit up to which the benefit is allowable to the donor. If the amount of deduction to a charitable organisation or trust is more than 10% of the Gross Total Income computed under the Act (as reduced by income on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of 10% of Gross Total Income shall not qualify for deduction under section 80G.
In other words, while computing the total income of an assessee and for arriving at the deductible amount under section 80G, first the aggregate of the sums donated has to be found out. Then 50 per cent of such donations has to be found out and it should be limited to 10 per cent of the gross total income. If such amount is more than 10 per cent of the gross total income, the excess will have to be ignored.
Any donation in excess of Rs. 2,000/- under section 80G should be made any mode other than cash.
Donee, the assesse is required to furnish certificate of amount received to every donor and also required to file statement of donation received to Income tax department.
On non compliance of above assesse will become assesse in default and liable to penalty u/s 271K and the quantum of penalty will be