80 G : Tax Exemption

Introduction

Registration under section 80G of Income Tax Act provides benefit to NGOs. If NGO has 80G certificate with them, donor gets financial benefit in his/her taxable amount of their income. If an NGO gets itself registered under section 80G then the person or the organization making a donation to the NGO will get a deduction of 50% from his/its taxable income. By availing 80G Certificate, NGO can attract more donors.

Registration u/s 80g

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 his/its taxable income. The NGO has to apply in Form No. 10G As per Annexure-29 to the Commissioner of Income Tax for such registration. Normally this approval is granted for 2-3 years.
The Finance Act, 2009, has deleted the five year restriction under proviso to sub section (5) clause (vi). In other words, registration certificates issued after 1st October, 2009 can be considered as one time registration unless any specific restriction is provided in the certification itself.

Documents required for registration

The application form should be sent in triplicate to the Commissioner of Income Tax alongwith the following documents :

i) copy of income tax registration certificate.
ii) detail of activities since its inception or last three years whichever is less
iii) copies of audited accounts of the institution/NGO since its inception or last 3 years whichever is less.

Condition for registration u/s 80g

For approval under section 80G the following conditions are to be fulfilled :

i) the NGO should not have any income which are not exempted, such as business income. If, the NGO has business income then it should maintain separate books of accounts and should not divert donations received for the purpose of such business.
ii) the bylaws or objectives of the NGOs should not contain any provision for spending the income or assets of the NGO for purposes other than charitable.
iii) the NGO is not working for the benefit of particular religious community or caste.
iv) the NGO maintains regular accounts of its receipts & expenditures.
v) the NGO is properly registered under the Societies Registration Act 1860 or under any law corresponding to that act or is registered under section 25 of the Companies Act 1956.

Benefits of registration u/s 80g

There is ceiling limit upto which the benefit is allowable to the donor. If the amount of deduction to a charitable organisation or trust is more than 10% of the Gross Total Income computed under the Act (as reduced by income on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of 10% of Gross Total Income shall not qualify for deduction under section 80G.
In other words, while computing the total income of an assessee and for arriving at the deductible amount under section 80G, first the aggregate of the sums donated has to be found out. Then 50 per cent of such donations has to be found out and it should be limited to 10 per cent of the gross total income. If such amount is more than 10 per cent of the gross total income, the excess will have to be ignored.
The persons or organisation who donate under section 80G gets a deduction of 50% from their taxable income. Here at times a confusion creeps in, that the tax advantage under section 80G is 50%, but actually it is not so. 50% of the donation made is allowed to be deducted from the taxable income and consequently tax is calculated.