80G Registration, what is it and how to benefit from it?
The Income Tax Act, of Indian Economy, contains a section specifically dedicated to the tax deduction under the section known as 80G registration. NGO’s, or other non-profit organizations should apply for it to get tax rebates under this section. 80G registration made its way into law book in the year 1967-68 and continues to be an important tax saving certificate.
What is an NGO?
NGO or non-profit organization refers to the organizations which do charity work, relief work or provide support to society in any way possible without earning profits. By profits, here we mean that such organizations earn revenue to support their staff and expenses. However, the purpose of NGOs is not to earn profit in the long run but rather to serve the society in the best possible manner.
NGO’s because they do not work for earning profits, therefore get the benefit of tax rebate under this section.
How does it benefit an individual?
An individual also gets the benefit of tax rebate under this section if he donates to an NGO registered under this section. Not only individuals but also all the firms, companies, organizations or sole proprietors can get the benefit of this section under the Income Tax Act.
In order, to get the benefit there are many guidelines and procedures to be followed. We shall look into all these in no time.
However, the real question arises that why you should go for this? The answer is very simple, in order to save your taxes. Conversely, you saved your tax by purchasing health insurance, you have also taken full advantage of tax deduction under 80G.
Do you want to save even more? Go for 80G.
The section 80G can help you save even more on your income tax, by donating money to an NGO (needs to be registered under 80G), or the relief fund set up by the Indian Government.
Let us now delve deeper into the subject matter:
We have already described who all can avail benefit under section 80G. All the individuals and separate legal entities can benefit under this.
Criteria for 80G registration taxation rebate:
The donations made to charities, NGOs which registered under section 80G can get the rebate under section 80 or government relief funds. However, charities done with religious purposes or done with business purposes are not eligible for taxation rebate. Moreover, if you donate to any foreign NGOs such as WWF, the Red Cross or even private organizations working within the boundaries of Indian territory are not eligible for taxation rebate.
Conditions for getting rebate under 80G registration certification:
1. Payment Mode:
The payment mode should be either cheques or demand drafts. However, if someone does pay in cash than the amount should be less than Rs 10,000 for it to be considered as eligible for a tax rebate.
Furthermore, any contributions made in kinds such as clothes, books, furniture or any other non-monetary donation cannot be claimed for tax rebate under 80G registration.
2. Contributions eligible:
In addition to the above criteria of eligibility, this is an important criterion too. All the funds thus donated do not fall under the 80G category. Individual donations receive a 100 percent tax exemption under the 80G.
Specifically, partnerships, firms, LLP’s, companies do not receive a rebate of 100 percent under the 80G registration. They can get a 50-percentage rebate under the 80G registration.
However, the government made a change in the year 2018-19, under which a person can avail a maximum deduction of Rs. 2,000, if the donation is made in cash. Furthermore, there is no limit on the amount if there donation is done through cheques or demand – drafts.
Earlier, the maximum limit allowed for donations was Rs. 10,000 but this was curbed to Rs. 2,000 in order to reduce the tax filers misusing the section by submitting the fake receipts.
The Income tax department has uploaded a list on its website specifying the tax deduction percentage of each registered organization. However, individuals and other entities must check this before making any contributions to any of the NGOs.
Another important point which must be highlighted is that there are clauses for the amount of donation:
1. Without Upper Limit:
The upper limit clause specifies that the donation made to an NGO or relief fund, the donor can claim a total of either 50 percent or 100 percent of the donation amount without any other limitation. Whether the percentage is 50 or 100 depends on the organization to which you are donating. Hence, one should choose thoroughly to choose the entity to which he/she is donating.
In order to choose the entity, one can see the organizations listed under the website of the Income Tax department. Organizations such as
2. With Upper Limit:
The “With Upper Limit” clause states that the applicable amount of deduction under the 80G registration that can be claimed whether 100 percentage or 50 percentage can be only 10 percent of the Gross adjusted income of the individual.
Gross adjusted income is calculated as the following:
Gross total income (xxxx)
less long-term capital gains (xxxx)
less all deductions under section 80C to 80U except for 80G (xxxx)
The donations made any Government or any local authority for the promotion of family planning qualify for claiming 100 percent of the 10 percent of the Gross adjusted income.
3. Documents Required for 80G registartion:
1. Name, address, and PAN number for the trust to which the donation was made.
2. In fact, the amount donated should be mentioned and the receipt should also be submitted.
3. If any donation can have a 100 percentage tax-rebate than form 58 must be asked from the organizations.
4. However, it is paramount to mention the registration number mentioned issued by the Income Tax Department.
5. The registration should be valid as of the date the receipt is issued.
4. 80G registration compliance requirements:
1. The application must be made by a public trust, registered society recognized educational institution. Individuals who have donated to the above-mentioned institutions can also file for the 80G registration.
2. The trusts applying for 80g registration must be registered under the Societies Registration Act, 1860 or Section 25 of the Companies Act, or any other relevant Acts.
3. Applicants must have proper books of accounts and must have maintained proper annual returns.
4. Moreover, entities must maintain proper books of accounts for donations so that they can be scrutinized properly.
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