INTRODUCTION
01 As we already know that an 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.
REGISTRATION UNDER SECTION 80G
02 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 As per Annexure-29
to the Commissioner of Income Tax for such registration.
Normally this approval is granted for 2-3 years.
The
Finance Act, 2009, has deleted the five year restriction
under proviso to sub section (5) clause (vi). In other words,
registration certificates issued after 1st October, 2009
can be considered as one time registration unless any specific
restriction is provided in the certification itself.
DOCUMENTS TO BE FILLED WITH FORM 10G
03 The application form should be sent
in triplicate to the Commissioner of Income Tax alongwith
the following
documents
:
i) copy of income tax registration certificate.
ii) detail of activities since its inception or last
three years whichever is less
iii) copies of audited accounts of the institution/NGO
since its inception or last 3 years whichever is less.
CONDITIONS TO BE FULFILLED UNDER SECTION 80G
04 For approval under section 80G the
following conditions are to be fulfilled :
i) the NGO should not have any income which are not exempted,
such as business income. If, the NGO has business income
then it should maintain separate books of accounts and
should not divert donations received for the purpose
of such business.
ii) the bylaws or objectives of the NGOs should not contain
any provision for spending the income or assets of the
NGO for purposes other than charitable.
iii) the NGO is not working for the benefit of particular
religious community or caste.
iv) the NGO maintains regular accounts of its receipts & expenditures.
v) the NGO is properly registered under the Societies
Registration Act 1860 or under any law corresponding
to that act or
is registered under section 25 of the Companies Act 1956.
EXTENT OF BENEFIT
05 There is ceiling limit upto 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.
CASH
PAYMENT UPTO RS. 10000/-
06 The
other important change made by the Finance Act, 2012 is that
any donation under section 80G has to be
made otherwise than in cash, if the amount
exceeds Rs. 10,000/-. In other words, donation in excess
of Rs.
10,000/- under section 80G should be made through account
payee bank transfers.
IILUSTRATION OF BENEFITS UNDER SECTION 80G
07 The persons or organisation 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.
08The ultimate benefit will depend
on the tax rates applicable to the assessee. Let
us take an illustration.
Mr. X an individual
and M/s. Y Pvt. Ltd., a Company both give donation
of Rs. 1,00,000/- to a NGO called Satyakaam. The
total income
for the year 2003-2004 of both Mr. X and Ms. Y Pvt.
Ltd. is Rs.
2,00,000/-. Now assuming that the rates are 30% for
the individuals and 40% for the Companies without
any minimum
exemption limit.
The tax benefit would be as shown in the table :
| |
Mr.
X |
MS.
Y Pvt. Ltd. |
| i)
Total Income for the year 2003-2004 |
2,00,000.00 |
2,00,000.00 |
| ii)
Tax payable before Donation |
60,000.00 |
80,000.00 |
| iii)
Donation made to charitable organisations |
1,00,000.00 |
1,00,000.00 |
iv)
Qualifying amount for deduction (50% of donation made) |
50,000.00 |
50,000.00 |
v)
Amount of deduction u/s 80G (Gross Qualifying Amount
subject to a maximum limit 10% of the Gross Total Income) |
20,000.00 |
20,000.00 |
| iv)
Taxable Income after deduction |
1,80,000.00 |
1,80,000.00 |
| v)
Tax payable after Donation |
54,000.00 |
72,000.00 |
| vi)
Tax Benefit U/S 80G (ii)-(v) |
6,000.00 |
8,000.00 |
Note : The tax rates and mode of computation is not actual
