Income Tax Exemption Under section 12-A and 80-G of Income Tax Act 1961

80G - Income Tax Exemption 
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 organization has obtained certification under section 80-G of Income Tax Act then donors of that NGO can claim exemption from Income Tax.

Registration Under 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  to the Commissioner of Income Tax for such registration

What is section 12-A of Income Tax Act. ?

Income of an organization is exempted if  NGO has 12-A registration. All income shall not be taxable after 12-A registration. This is one time registration.

When an organization can apply for registration under section 12A and 80G of Income Tax Act?

Application for registration under section 12A and 80G can be applied just after registration of the NGO.

Where to apply for registration under section 12A and 80G of Income Tax Act?

Application for registration under section 12A and 8OG can be applied to the Commissioner of Income-tax having jurisdiction over the institution.

Can both the applicatlons under section 12A and 80G of Income Tax Act be applied together?

Yes ! Both applications can be applied together or it can also be applied separately also. If some organization is willing to apply both applications separately, then application for registration u/s 12A will be applied first. Getting 12A registration is must for applying application for registration
u/s 80G of Income Tax Act.

Generally what is the timeline for getting registration under section 12A and 80G of Income Tax Act?

If application for registration under section 12A and 80G will be applied through NGO Factory, it should take 3 to 4 months.

What is the procedure for getting registration under section 12A and 80G of Income Tax Act?

Step-1: Dully filled-in application will be submitted to the exemption section of the lncome Tax Department.

Step-2: NGO will receive notice for clarifications from Income Tax Department in 2-3 months after applying.

Step-3: Reply of notice will be submitted by the consultant along with all relevant desired documents to the Income Tax Departments.

Step-4: Consultant will personally visit the Income Tax Departments to follow-up the case on behalf of the applicant organization.

Step-5: Exemption Certificates will be issued.

What is the validity period of the registration under section 12A and 80G of Income Tax Act?

12A & 80G registration : Lifetime validity

What application forms are being used for applying for registration under section 12A and 80G of Income Tax Act?

12A registration : Form 10A
80G registration: Form 10G 

What are the conditions on Section 80G?

There are few conditions to be fulfilled under the section 80G:

• The NGO should not have any income which are not exempted, such as business income. lf, 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.
• 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.
• 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 25 of the Companies Act 1956.

What is Tax Exemption limit on donations?

There is a limit on how much money can be exempted from the Income Tax.

• 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.
• 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.
• The ultimate benefit will depend on the tax rates applicable to the assessee. 

Documents reguired for registration u/s 12A AND 80G:

1. Dully filled in Form - 10A for registration u/s 12A registration;
2. Dully filled in Form - 10G for registration u/s 80G registration;
3. Registration Certificate and MOA /Trust Deed (two copies - self attested by NGO head);
4. NOC from Landlord (where registered office is situated);
5. Copy of PAN card of NGO;
6. Electricity Bill / House tax Receipt /Water Bill (photocopy);
7. Evidence of welfare activities carried out & Progress Report since inception or last 3 years;
8. Books of Accounts, Balance Sheet & ITR (if any), since inception or last 3 years;
9. List of donors along with their address and PAN;
10. List of governing body I board of trustees members with their contact details;
11. Original RC and MOA /Trust Deed for verification;
12. Authority letter in favor of NGO Factory;
13. Any other document I affidavit / undertaking I information asked by the Income Tax department

INSPITE of all the contributions made to social causes, there is a huge gap between the demand of money from the needy and the amount donated by philanthropists. This probably, is the reason why the Government has given tax benefits on donations. The amount donated towards charity attracts deduction under section 80G of the Income Tax Act, 1961. Section 80G has been in the law book since financial year 1967-68 and it seems it’s here to stay. Several deductions have been swept away but the tax sop for donations appears to have survived the axe. The main features of tax benefit with respect to charity are as follows:

Allowable to all kind of Assessee:- Any person or ‘assessee’ who makes an eligible donation is entitled to get tax deductions subject to conditions. This section does not restrict the deduction to individuals, companies or any specific category of taxpayer.

Donation to Foreign Trust:- Donations made to foreign trusts do not qualify for deduction under this section.

Donation to Political Parties:- You cannot claim deduction for donations made to political parties for any reason, including paying for brochures, souvenirs or pamphlets brought out by such parties.

Only donation made to made to prescribed funds and institutions qualify for deduction: - All donations are not eligible for tax benefits. Tax benefits can be claimed only on specific donations i.e. those made to prescribed funds and institutions.

Maximum allowable deduction:- If aggregate of the sums donated exceed 10% of the adjusted gross total income, the amount in excess of 10% ceases to be entitled for tax benefit.

Documentation Required for Claiming deduction U/s. 80G

• Stamped receipt:  For claiming deduction under Section 80G, a receipt issued by the recipient trust is a must. The receipt must contain the name and address of the Trust, the name of the donor, the amount donated (please ensure that the amount written in words and figures tally).
• Mention of Registration No. of the Trust Under 80G on receipt:- The most important requirement is the Registration number issued by the Income Tax Department under Section 80G. This number must be printed on the receipt. Generally, the Income Tax Department issues the registration for a limited period (of 2 years) only. Thereafter, the registration has to be renewed. The receipt must not only mention the Registration number but also the validity period of the registration.
• Validity of Registration U/s. 80G  on the date of Donation:- The donor must ensure that the registration is valid on the date on which the donation is given. For example, the registration of a trust may be valid from April 1, 2007 to March 31, 2009. Now, if the trust does not get its registration renewed on or after April 1, 2009 then even if donation receipt is issued by the trust to the donor for donations received on or after April 1, 2009, the donor would not get any tax benefit.