Guide to 80G Registration
Guide to 80G Registration
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. When an NGO secures registration under section 80G, it creates an incentive for potential donors. Individuals or organizations that donate to the registered NGO can claim a 50% deduction from their taxable income. This article provides a comprehensive guide on obtaining 80G registration, making the process more accessible for potential donors and non-profit organizations.
Register Now!What is Section 80G?
Section 80G of the Income Tax Act, 1961 is a provision that allows individuals and organizations to claim tax deductions on donations made to eligible charitable organizations.
When an organization obtains an 80G certificate, it means that it has been registered and recognized by the Income Tax Department as eligible to receive donations exempt from income tax. Donors who contribute to such organizations can claim deductions on their taxable income, up to a specified limit, based on the amount donated.
Understanding 80G Registration
Under the Income Tax Act of 1961, the 80G registration provides a pathway for donors to avail tax deductions on their contributions to qualified charitable entities. This registration bestows donors with tax relief and benefits the receiving organizations. Organizations holding an 80G certification can attract more contributions due to the associated tax deductions. At the same time, donors can enjoy financial relief by deducting the donated amounts during income tax submissions.
Benefits of 80G Registration
- Tax Deductions: The primary advantage of obtaining 80G registration is eligibility for tax deductions. Donors can claim deductions of up to 50% or 100% of the donated amount. This depends on the category of the charitable institution. The exact percentage of deductions depends on the organisation’s classification as defined by the income tax department.
- Wider Reach: Being registered under Section 80G enhances the credibility and transparency of charitable organisations, making them more appealing to potential donors. This registration provides access to a larger pool of donors and enables non-profits to raise funds more effectively. Individuals and corporations are more likely to contribute to organisations with 80G registration, as it assures them that their donations will be used for genuine charitable purposes.
Eligibility Criteria for 80G Registration
To be eligible for 80G registration, charitable organisations must fulfill specific criteria:
- Legal Structure: The organisation should be registered under the appropriate legal structure recognised by the Indian government, such as a trust, society, or non-profit company.
- Non-profit Nature: The organisation’s primary objective must be promoting charitable activities rather than generating profits.
- Proper Documentation: The organisation should maintain proper accounting records and have its accounts audited annually. It must maintain compliance with income tax regulations.
- Registration under Section 12A: Prior registration under Section 12A is a prerequisite for obtaining 80G registration. Section 12A provides tax exemptions to charitable institutions; therefore, registration under it is necessary before applying for 80G.
- Non-Exempt Income from Business Activities: The organisation must not have any non-exempt income derived from business activities. If any business income exists, separate accounting records must be maintained. Donations received should not be used for purposes unrelated to charitable activities.
- Non-Focus on Specific Communities: The organisation must not exclusively focus on benefiting a specific religious community or caste.
- Registration Number from Darpan Portal: For registration or re-validation, a registration number from the Darpan portal of Niti Aayog is mandatory when receiving or planning to receive grants or assistance from the Central Government or State Government.
Documents required for 80G registration
To apply for 80G registration, the following documents are mandatory along with Form 10A/10AB:
- Self-certified copy of the organisation’s incorporation document.
- Self-certified copy of the registration certificate issued by the relevant authority.
- Self-certified copy of the registration under the Foreign Contribution Regulation Act (FCRA), if applicable.
- Self-certified copy of the existing order granting approval under clause (23C) of section 10.
- Copies of annual accounts for up to three years preceding the application for existing entities.
- If business income is included in the organisation’s income, copies of annual accounts and audit reports as per Section 44AB for the three years prior to the application.
- Details of the organisation’s operations since its inception or the last three years, whichever is shorter.
80G Certificate
The 80G Certificate, issued by the Income Tax Department, is a recognition given to non-governmental entities like charitable trusts or Section 8 Companies. Its primary purpose is to incentivize donors to contribute funds to these non-profit organizations. By donating to an institution with an 80G Certificate, donors can benefit from a 50% tax relief on the donated amount, which they can then deduct from their Gross Total Income. To claim this exemption, it’s essential for donors to furnish a stamped receipt of their contribution. This receipt should clearly detail the donor’s name, donation date, and the PAN of the recipient organization.
Changes in 80G Registration Norms
While previously, 80G registration was typically a one-time process unless specific restrictions were outlined in the registration certificate, the Finance Act 2020 introduced noteworthy modifications to this framework.
Registration Process for New Entrants
Organizations seeking an initial registration under section 80G must apply to the Principal Commissioner or Commissioner. Successful applications will result in a provisional registration valid for three years. Importantly, this registration’s validity starts from the Assessment Year for which it was sought. As for renewing this registration, organizations must:
- Apply a minimum of six months before the end of the validity period, or
- Submit the renewal application within six months from the beginning of their activities, depending on which of these two deadlines comes first.
80G Registration Validity and Renewal
The provisional registration is set for three years initially. Once this period concludes, a renewal is essential. However, post-renewal, the registration’s validity is capped at five years. At the end of every five-year cycle, a subsequent renewal is necessary to maintain the benefits.
80G Registration Process
The procedure for 80G registration can be summarized in the following key steps:
- Initiation of the Application: Organizations must direct their 80G certificate application to the Commissioner of Income Tax (Exemption) situated within the jurisdiction of the applying institution.
- Submission and Inspection: After submitting the necessary forms and accompanying documents, a physical inspection of the premises is undertaken by the Income Tax department.
- Provision of Additional Documents: During the inspection, the Income Tax officials might request supplementary documents or evidence. It’s crucial for the institution to promptly provide these additional details.
- Certification: Following a thorough review and satisfactory validation of both the documents and the NGO’s premises, the Commissioner bestows the institution with the coveted 80G certificate.
Streamlining 80g Registration with IndiaFilings
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