Section 80G & 12AB – Tax Exemption for NGOs and Donors
Mandatory Registration for Tax Benefits • Ensure Compliance for Donor Deductions
Conditions to be Fulfilled under Section 80G
- 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.
- 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 does not operate to benefit any specific 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.
Issuance Certificate of Registration (12AB) and Approval (10G)
On receipt of the application under 10A, the PCIT or CIT shall pass an order in writing granting approval in Form No. 10AC and issue a sixteen-digit alphanumeric Unique Registration Number (URN) to the applicants. The PCIT/ CIT is also entitled to demand further documents from the applicant if the need for the same is felt, or may reject the application after giving an opportunity of being heard. The rejection order will also be passed in Form No. 10ACThe registration accorded to the NGO will be valid as per the new provisions of act amended through Finance Act 2020.
On receipt of application under 10AB, the order of registration or rejection or cancellation of registration shall be in Form No. 10AD and in case if the registration is granted, sixteen-digit alphanumeric number URN shall be issued by the PCIT or CIT. In this case also, PCIT/ CIT is entitled to demand further documents from the applicant to satisfy himself about the genuineness of activities of the trust or institution and the compliance of such requirements of any other law for the time being in force by the trust or institution as are material to achieve its objects.
Documents Required for 80G & 12AB
- Self-certified copy of incorporation document of Trust/Societies (created under instrument or otherwise)
- Self-certified copy of registration with Registrar of Companies or Registrar of Firms and Societies or Registrar of Public Trusts, as the case may be.
- Self-certified copy of FCRA registration, if the applicant is registered under such Act.
- Self-certified copy of existing order granting approval under clause (23C) of section 10.
- In case of existing entities, copies of annual accounts for the period not exceeding 3 years immediately preceding the year in which the application is made
- Where the income of the entity includes profits and gains of business as per the provisions of sub-section (4A) of section 11, copies of annual accounts and audit report u/s 44AB for 3 years immediately preceding the year in which the said application is made
- Details of activities since its inception or last three years whichever is less.
Donation Deduction Categories under Section 80G
100% Deduction Without Qualifying Limit
- National Defence Fund set up by the Central Government
- Prime Minister's National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
- Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
- Fund set up by a state government for medical relief to the poor
- National Illness Assistance Fund
- National Blood Transfusion Council or any State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- National Sports Fund
- Fund for Technology Development and Application
- National Children's Fund
- Chief Minister's Relief Fund or Lieutenant Governor's Relief Fund with respect to any State or Union Territory
- The Army Central Welfare Fund or, the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister's Cyclone Relief Fund, 1996
- The Maharashtra Chief Minister's Relief Fund during 1st October 1993, and 6th October 1993
- Chief Minister's Earthquake Relief Fund, Maharashtra
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
- Prime Minister's Armenia Earthquake Relief Fund
- Africa (Public Contributions – India) Fund
- Swachh Bharat Kosh (applicable from FY 2014-15)
- Clean Ganga Fund (applicable from FY 2014-15)
- National Fund for Control of Drug Abuse (applicable from FY 2015-16)
50% Deduction Without Qualifying Limit
- Prime Minister’s Drought Relief Fund.
100% Deduction Subject to 10% of Adjusted GTI
- Donations to the government or any approved local authority, institution or association to be utilised to promote family planning
- Donation by a company to the Indian Olympic Association or any other notified association or institution established in India to develop infrastructure for sports and games in India or sponsor sports and games in India.
50% Deduction Subject to 10% of Adjusted GTI
- Any other fund or institution satisfies the conditions mentioned in Section 80G(5).
- Government or any local authority, to be utilised for any charitable purpose other than promoting family planning.
- Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development or improvement of cities, towns, villages or both.
- Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community.
- For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places.
Adjusted Gross Total Income & Deduction Limit
Calculation of Adjusted Gross Total Income (GTI)
Adjusted GTI is calculated by reducing the following from the Gross Total Income (GTI):
- Deductible amounts under Section 80C to 80U (excluding Section 80G).
- Long-term Capital Gains and Short-term Capital Gains (arising from specified securities u/s 111A).
- Share of profit in Association of Persons (AOP) eligible for rebate u/s 86.
- Any income specified in Sections 115A, 115AB, 115AC, 115ACA, 115AD, and 115D.
Example: Max Allowable Deduction
| Item | Amount (?) |
|---|---|
| Gross Total Income (GTI) | 14,00,000 |
| Less: Deduction u/s 80C | (1,50,000) |
| Less: STCG u/s 111A | (2,50,000) |
| Adjusted Gross Total Income (Adjusted GTI) | 10,00,000 |
| Qualifying Limit (10% of Adjusted GTI) | 1,00,000 |
| Donation Made (Eligible for 50% deduction) | 90,000 |
| Max Allowable Deduction (50% of ₹90,000) | 45,000 |
Note: Ensuring the availability and correctness of these documents is vital for substantiating the claim for tax deductions under Section 80G. Donors should maintain these records accurately to facilitate a smooth and legitimate deduction process during income tax filing.
Essential Documents for Donors to Claim 80G
Ensuring the availability and correctness of these documents is vital for substantiating the claim for tax deductions under Section 80G:
- Duly Stamped Receipt: It is imperative to obtain a receipt from the charity or trust to which the donation is made. The receipt should be duly stamped and include crucial details such as the donor's name, address, donated amount, PAN number of the trust, and other relevant information.
- Form 58: Form 58 becomes necessary when a donor intends to claim a 100% deduction. This form is required to validate and support the claim for such deductions.
- Trust's Registration Number (URN): Eligible trusts under Section 80G are assigned a registration number by the Income Tax Department. Donors must verify and ensure that the receipt they receive contains the trust's registration number, serving as a crucial validation for the donation.
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FAQ's on 80G & 12AB
Your Questions Answered
What is the purpose of registering under Section 12AB?
Registration under Section 12AB is mandatory for trusts or institutions to claim income tax exemption under Section 11 and 12 of the Income Tax Act.
Is a Section 8 Company or Trust required to register under 12AB?
Yes, any charitable or religious institution (including Trusts, Societies, and Section 8 Companies) must obtain registration under Section 12AB to qualify for tax exemption.
What is the main benefit of obtaining 80G registration?
The main benefit of 80G registration is that it allows donors to claim a deduction (usually 50% or 100%) on the amount they donate to the registered organization from their own taxable income.
Can a newly formed NGO directly apply for both 12AB and 80G registration?
Yes, the process is now consolidated. A new institution must first obtain provisional registration under Section 12AB, and subsequently apply for final registration and 80G approval.
What is the standard validity period for Section 80G registration?
Section 80G registration is now granted for a fixed period, typically five years, after which a renewal application must be filed.
What is the significance of the new online Form 10AB?
Form 10AB is used for applying for final registration under Section 12AB and for the renewal of Section 80G registration after the expiry of the provisional or previous five-year term.
What is the compliance requirement for organizations receiving donations under 80G?
Organizations must submit an annual statement of donations received (in Form 10BD) and provide a certificate to the donors (in Form 10BE) to allow them to claim the deduction.
Can an organization claim tax exemption without 12AB registration?
No, without valid registration under Section 12AB (or its predecessor 12A/12AA), the income of the trust or institution will be treated as normal income and will be subject to tax.
Section 12AB & 80G
Tax Exemptions for NGOs and Deduction Benefits for Donors
80AB & 80G Registration
80AB and 80G registrations provide tax benefits and compliance recognition for eligible non-profit organizations. They help build donor trust by enabling income-tax deductions on eligible donations.
