Indian tax law allows certain charitable contributions to be deductible under section 80G of the Income Tax Act. However, in order to be held accountable for these deductions and tax credits, non-profit organizations must obtain the necessary documentation, including 80G certification.
Under the Income Tax Act, Section 80G, certain contributions or donations are eligible for a tax deduction. NGOs and different non-income companies have to sign up and validate themselves with the Income Tax Department to obtain such certifications.
Since the organizations receive donations from businesses and individuals, strict measures must be taken to ensure transparency and efficiency. The state provides various tax benefits and deductions for these organizations when they perform charitable activities.
Eligibility for 80G Exemptions
Only donations to charities registered under Section 80G are eligible for the 80G deduction and registration. In most cases, religious or business charities are not eligible for 80G certification. Likewise, gifts to trusts operating outside India are not subject to such tax deductions. Also, individuals who donate to private foundations or political parties that are not registered in 80G are not eligible for tax relief on their donations. These donations and donations will still become part of your taxable income. The 2020 Budget requires each charitable foundation or institution registered under Section 80G to submit a statement of contributions received. Donors receive a tax deduction under Section 80G based on information provided by a charitable foundation or institution.
What Are the Tax Deductions Under 80G?
Taxpayers may qualify for an 80G waiver if certain requirements are met, such as payment method and deductible interest. The following is a brief overview of the criteria on which an individual may qualify for a tax deduction under Section 80G.
All donations to charitable organizations must be made by check or demand drafts. For cash donations, donations must be less than Rupees 10,000 to be tax-deductible. Donations such as clothing, gifts, or food are not tax-free as donations.
Percentage Of Contribution Eligible For Deductions
Not all foundations fall into the 80G category and only some foundations donate 100% tax relief on what you pay. The rest are subject to 50% duty-free. Also, donations to trusts or non-governmental organizations that are not 80G certified are exempt from tax exemption. Therefore, it is important to apply for 80G certification in trusts, NGOs, and societies seeking donations from fellow citizens
Documents Required As Proof
If you made a donation to a foundation or charitable organization with the 80G certificate, you must submit the following documents when reporting.
1. Stamped Receipt
All trusts and organizations that receive donations must provide a stamped receipt on receipt of funds received. Individuals must obtain this receipt and present it on their tax return in order to receive benefits. Receipts must include the organization name, official seal, TIN number, and date of issue.
2. Form 58
For donations to the 100% Waiver Fund, individuals must submit Form 58 from the organization. The receipt must include the registration number of the organization 80G. All receipts from registered organizations must have a number printed on them, but if they cannot be found on the receipt, the individual must specifically request it.
Eligibility for 80G Registration
Not all NGOs or trusts can be 80G certified as there are specific rules and guidelines for non-profit eligibility. Here is a brief overview of some of the conditions that organizations must meet to be 80G certified:
1. Separation of business and charity: If your organization is involved in business other than the charitable component, you must segregate that organization in order to receive an 80G waiver certificate.
2. No misuse: Donations received to date must not be misused or used for any other purpose, even within the organization. As a result, all such entities are required to follow strict accounting principles to demonstrate that their funds have not been misused.
3. No religious activity: Non-governmental organizations or trusts that participate in religious sermons or work for certain castes or denominations are not eligible for 80G certification.
4. Proper accounting: As mentioned earlier, companies must maintain accurate and up-to-date ledgers and records of financial transactions as evidence before applying for an 80G exemption.
5. Appropriate registration: The organization must be registered under the Societies Registration Act of 1860 or Section 25 of the Companies Act of 1956. The organization must be established under the Societies Registration Act of 1860 or Section 25 of the Companies Act of 1956.
Tax Benefits to the Organisation
Certification helps donors reduce their tax obligations by 10-50% of the amount donated. However, 80G certification goes beyond allowing donors to claim tax exemptions on their donations. It also provides organizations with several tax incentives. Institutions are eligible for a 10% exemption on donations and gross income from donations.
Moreover, the Income Tax Department has the electricity to approve or reject such requests upon disqualification of the non-income business enterprise or dissatisfaction with its activities. While the number one position of 80G certification is to inspire donors to donate price range to non-income businesses, it is able to assist businesses in numerous ways.
How to Apply for an 80G Registration
80G Certification is a document issued by income tax departments for specific emergency equipment that allows donors to use tax deductions for donations. As a result, NGOs and other non-profit organizations must obtain 80g registration, and increase the contribution of first. To apply for an 80G certificate, your organization must first get certificate 12A. The organization must then write and submit 10g properly with a copy of the report on the past three years. In addition, it should not provide proven statements for the past three years to complete the validation process.
There is a copy of the 80G application on the website of the Income Tax Department, but the registration process is quite complicated. As a result, most non-profit organizations seek the help of professional legal services providers to complete their 80G registration. It is recommended that you seek professional help in this process, as even a small mistake in submitting your documents can delay a long time. In addition, the IT department carefully reviews applications, activity reports, and verified applications before approving them.