Section 80G of the Income Tax Act, 1961, allows donors to claim deductions for donations made to charitable organizations, enhancing the attractiveness of donations. Registration under Section 80G is essential for non-profit organizations to enable their donors to claim these tax benefits. Here’s a detailed guide on Section 80G registration:
Benefits of Section 80G Registration
- Donor Incentives: Enables donors to claim tax deductions, encouraging more donations.
- Increased Credibility: Enhances the credibility of the organization in the eyes of donors and the public.
- Financial Support: Helps in securing funds and donations from individuals and corporate donors.
- Tax Exemption: Part of the donation amount is exempt from tax for the donor, making it financially beneficial for them.
Eligibility Criteria for Section 80G Registration
- Non-Profit Nature: The organization must be a non-profit entity established for charitable purposes.
- Exclusivity of Purpose: The organization’s income should not be used for purposes other than charitable activities.
- No Religious Activity: The organization should not be involved in activities that promote a particular religion.
- Proper Management: The organization must maintain proper accounts and should be duly registered under applicable laws.
Documents Required for Section 80G Registration
- Incorporation Documents:
- Trust Deed in the case of a trust.
- Memorandum of Association (MOA) and Articles of Association (AOA) in the case of a society or company.
- PAN Card: Copy of the PAN card of the organization.
- Financial Statements: Audited accounts for the last three financial years.
- Activity Report: Detailed report of activities conducted since inception or during the last three years.
- Bank Account Details: Copy of the bank statement of the organization.
- Founders’ Details: Details of the founders or trustees, including their PAN and Aadhaar.
- Address Proof: Address proof of the registered office of the organization.
- Governing Body Members’ List: A list of the members of the governing body.
- 12A Registration Certificate: Copy of the 12A registration certificate.
Process of Section 80G Registration
1. Application Preparation
- Prepare the application in Form 10G as prescribed under the Income Tax Act.
2. Submission
- Submit the application online through the Income Tax Department’s e-filing portal. Ensure all documents are digitally signed by the authorized signatory.
3. Acknowledgment
- After submission, an acknowledgment number is generated for future reference.
4. Review by Tax Authorities
- The application is reviewed by the Commissioner of Income Tax (Exemptions). Additional documents or information may be requested during this process.
5. Inspection
- If required, the tax authorities may conduct an on-site inspection to verify the activities and operations of the organization.
6. Approval
- Upon satisfactory review and inspection, the Commissioner grants the registration under Section 80G.
7. Issuance of Certificate
- The registration certificate is issued, which is typically valid for a specific period (usually five years). Renewal is required before the expiry of the registration.
Renewal of Section 80G Registration
- Timely Renewal: Apply for renewal in Form 10AB at least six months before the expiry of the current registration.
- Continued Compliance: Ensure continuous compliance with the rules and regulations to avoid issues during renewal.
- Updated Documentation: Submit updated financial statements, activity reports, and other relevant documents as required.
Important Considerations
- Purpose and Activities: Ensure that the activities of the organization strictly adhere to the charitable purposes stated in the trust deed or MOA.
- Financial Transparency: Maintain transparent and accurate financial records to facilitate smooth processing of the application.
- Compliance: Regularly comply with all regulatory and legal requirements to avoid complications during registration or renewal.
- Professional Assistance: Consider seeking professional assistance from a Chartered Accountant or legal expert specializing in non-profit compliance to ensure accurate and timely registration.
Section 80G registration is essential for non-profit organizations to attract donations by providing tax benefits to donors. Proper documentation, adherence to regulatory requirements, and timely submission of applications are crucial for obtaining and maintaining this registration. Engaging professional assistance can streamline the process and ensure compliance with all relevant provisions of the Income Tax Act.
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Section 80G registration is granted to charitable organizations under the Income Tax Act, 1961, which allows donors to claim tax deductions on donations made to such organizations. A donor can claim a deduction of 50% or 100% of the donated amount from their taxable income, depending on the type of organization.
Any charitable organization, non-profit organization (NGO), trust, or society involved in charitable activities can apply for Section 80G registration. The organization should be registered under Section 12A (for tax exemption) and must engage in activities that benefit society, such as education, medical relief, and poverty alleviation.
- Tax benefits for donors: Donors are eligible to claim deductions on donations under Section 80G.
- Increased donations: Organizations registered under Section 80G are more likely to receive donations as donors can avail themselves of tax benefits.
- Credibility: The registration enhances the organization’s credibility as it is recognized by the Income Tax Department.
To be eligible for Section 80G registration:
- The organization must be a non-profit entity.
- The organization must be registered under Section 12A of the Income Tax Act.
- The organization should not engage in activities related to religious purposes or solely for the benefit of a specific caste or community.
- It must maintain proper books of accounts and have a valid PAN.
The procedure to apply includes:
- Filing Form 10G along with necessary documents.
- Submission of the application to the Commissioner of Income Tax (Exemptions) under whose jurisdiction the organization falls.
- Attach supporting documents like registration certificates, financial statements, and activity reports.
- The Commissioner will scrutinize the application and may ask for additional information.
- Once satisfied, the Commissioner grants Section 80G registration.
The key documents required include:
- Registration certificate of the trust or society.
- PAN card of the organization.
- Section 12A registration certificate.
- Financial statements for the last 3 years.
- Activity reports detailing the charitable activities undertaken by the organization.
- List of donors, if applicable.
Previously, Section 80G registration was granted for an indefinite period. However, after recent amendments, Section 80G registration is valid for a period of 5 years. Organizations need to apply for re-registration before the expiry of this period to continue enjoying the benefits.
- Donations to certain funds like the Prime Minister’s National Relief Fund, National Defence Fund, and PM CARES Fund qualify for a 100% deduction without any qualifying limit.
- Donations to other charitable institutions qualify for a 50% deduction, subject to a limit of 10% of the donor’s gross total income.
- Some specific institutions may have 50% or 100% deductions depending on the nature of the donation and the institution’s approval under Section 80G.
Cash donations exceeding ₹2,000 are not eligible for deductions under Section 80G. Donations must be made via banking channels such as cheque, demand draft, or online transfer to qualify for the deduction.
If the organization misuses the donations or fails to apply them towards charitable purposes, the Income Tax Department may:
- Revoke the Section 80G registration.
- Impose penalties on the organization.
- Deny tax benefits for both the organization and the donors.
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