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.
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 their taxable income. The NGO has to apply in Form No. 10G to the Commissioner of Income Tax for such registration.
Any new application for registration made on or after 1st April 2021 shall be approved only for a period of 3 years and thereafter approval for 80G needs to be reapplied at least 6 months prior to the validity period. The subsequent approval shall be valid for five years.
- Payments made to Prime Minister Relief Fund is eligible for 100% without any limit.
- Deductions made to trusts like “Indira Gandhi Memorial Trust” is eligible for 50% deduction without any limit.
- An approved institution is eligible for 100% exemption.
- Any charitable trust that falls under the list is eligible for 50% deduction.
Conditions to be fulfilled under Section 80G
- Income then it should maintain separate books of accounts and should not divert donations received for the purpose of such business.
- The bylaws or objectives should not contain any provision for spending the income or assets of the NGO for purposes other than charitable.
- The NGO is not working for the benefit of particular religious community or caste.
- The NGO maintains regular accounts of its receipts & expenditures.
- The NGO is properly registered under the Societies Registration Act 1860 or under any law corresponding to that act or is registered under section 8 of the Companies Act 2013.
- Copy of income tax registration certificate.
- Details of activities since its inception or last three years whichever is less.
- Copies of audited accounts of the institution/NGO since its inception or last 3 years whichever is less.
Registration under this section will be processed by the Commissioner of Income Tax after receiving an application from the applicant in Form 10G. The application should be accompanied by the following documents:
- Registration Certificate
- MOA /Trust Deed
- NOC from the proprietor of the land where the registered office is situated.
- Copy of the Pan Card of the Trust/Institution.
- Copy of electricity bill, house tax receipt, or water bill
- Proof of welfare activities pursued
- Progress Report since the foundation of the NGO or for the previous 3 years
- The statement of accounts and balance sheet since the foundation/previous 3 years
- List of contributors along with their address and PAN.
- List of governing body of trustees with their contact details
- Copy of registration granted under section 12A or copy of notification issued under section 10(23)or section 10(23C)
On receipt of the application, the Commissioner may pass a written order which would effectively register the trust/institution under Section 80G of the Income-tax Act. The Commissioner can also demand further documents from the applicant if the need for the same is felt, or reject the application.
The registration accorded to the trust will be valid for a period of one-three years.