Introduction of 80G Certification

A non-profit organization (NGO) can obtain income tax exemption by registering and completing certain other formalities, however, this 80G certification provides no benefit to those who make donations. The Income Tax Act has provisions that provide tax breaks to "donors". All NGOs should take advantage of these provisions to attract potential funders. Section 80G is one of these sections.

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What is 80G Certification?

80G is a certificate that makes you not liable to partly or fully pay taxes in case you have made any donation to charitable trusts or section 8 companies (registered under non-profit organizations) or any organization that allows you to avail tax- exemption under section 80G. However, there are certain criteria to claim the exemptions assigned under 80 G

In this blog, we will discuss how and who can claim 80 G tax deductions and its tax benefits for donors of an NGO.

Who Can Claim 80G Tax Savings?

• The amount donated by a person can be professed as a deduction while filing a tax return.  
• Donations made to listed trusts and organizations are only appropriate for deduction.
• Someone who makes a suitable donation is allowed to avail tax exemptions under 80G.   

How to Claim 80G Deductions While Filing ITR?

To claim the deductions under 80G, an individual has to provide the details of their donations in ‘Schedule’ in the ITR form. Tables A, B, C, and D are included in the schedule.

What are Tables A, B, C, and D?

• Table A is for the donations that qualify for a 100% deduction without any qualifying limit.
• Table B is for the donations that qualify for a 50% deduction without any qualifying limit.
• Table C is also for the donations that qualify for a 100% deduction without any qualifying limit.
• Table D is for the donations that qualify for a 50% deduction without any qualifying limit.

To learn about the list of donations eligible under each table. Refer to Section 80G Deduction - Donations Eligible under Section 80G - Tax2win

What is the Qualifying Limit?

A donor must check the qualifying limit for each institution or fund you are donating to. A qualifying limit is when all the donations made to a donor (beneficiary), listed in Tables C and D combined, should not go beyond 10% of Adjusted Gross Total Income (TOTAL INCOME MINUS DEDUCTIONS).

Documents required to claim deduction under 80 G.

If you want to claim donations under 80 G of the Income Tax Act, you need to have the following documents:

• Donation Receipt: Donation receipt includes charitable institutions with donor details, amount of the donation, and section 80 G registration number.
• PAN (Permanent Account Number): as a donor, you need to have your own PAN as its details are required to claim the deduction.
• Details of charitable institution: An individual needs to provide details such as name, address, and 80 G registration details of the charitable organization.
• Proof of Payment: An individual needs to give proof of the payment made to an NGO, such as your bank statement and transaction record showing the mode of payment.
• Form 16 A: Incas’, the charitable organization you have donated to has issued a TDS certificate you can use for tax-deductible donations.
• Self-Declaration Form (for cash donations): In case you have donated any cash, the Self Declaration Form is required with specifying details.  
• Bank Account Details: An individual needs to provide the bank account used for donation.  
• 80 G deduction Details: Donors have to provide accurate information about the donation, the information includes: the amount, date, and other relevant details for claiming deduction.

Key Factors Determining Eligibility for 80G Certification

Then there are the four most important factors that determine eligibility for 80G instrument in India

Registration under the Relevant Acts: 

• Requirement: The organization must be lawfully registered under applicable legislation, such as the Societies Registration Act of 1860, the Indian Trusts Act of 1882, or as a Section 8 Company under the Companies Act of 2013.
• Importance: This formal registration provides the organization's legal status and assures that it functions within the framework of Indian law, thereby making it eligible for tax benefits.

Charitable purpose: 

• Requirement: The entity must be founded with the intention of serving a charity purpose, which may include activities such as poverty relief, education, medical relief, and the advancement of any other cause of wide public value. 
• Importance: The organization's primary goal must align with charitable operations as specified by the Income Tax Act of 1961. This guarantees that the tax benefits are under the 80G certification.

Non-profit operations:

• Requirement: The organization shall be non-profit, which means that any cash generated should be used entirely for philanthropic causes rather than personal benefit.
• Importance: It is critical to ensure that monies allocated to the organization are not exploited for personal gain. This criterion is critical to sustaining the organization's integrity and public trust, which justifies the tax exemption.

Proper Account Maintenance and Documentation:

• Requirement: The organization must keep transparent and accurate financial records, such as income and expense accounts, balance sheets, and donor information.
• Importance: Detailed and well-maintained accounts are required to demonstrate compliance with legal and regulatory obligations. This transparency is required for the evaluation and approval procedure by the Income Tax Department, ensuring that the

Eligibility Criteria for 80G Registration

To be eligible for 80G criteria registration have must follow several points:

• Legal Structure: The organization should be registered under a legal structure approved by the Indian government, such as a trust, society, or non-profit corporation.
• Non-profit nature: The organization's primary goal must be to promote charitable activities rather than to generate money.
• Proper documentation: The organization's accounting records should be kept up to date and audited on an annual basis. It must comply with income tax standards.
• Registration under Section 12A: Prior registration under Section 12A is required for 80G registration. Section 12A grants tax breaks to charity organizations; so, registration under it is required before filing for 80G.
• Non-Exempt Income from Business Activities: The organization must not generate any non-exempt income from business activities. If you have any company income, you must keep separate accounting records.

Read Our Blog: How to Fill 80G Schedule

Tax Benefits for Donors of an NGO?

In a broader perspective, if you are making a donation to any non-profit or charitable organization, it is marked as an absolute act of novelty, it not only is beneficial for society but poses multiple tax benefits to an individual.

If you are an Indian citizen, section 80 G of income tax allows you to claim deductions on your income tax returns for donations made to charitable organizations.

Here are some tax benefits under the 80G deduction.

• Tax Saving: Tax saving by making donations is one of the most important factors in financial planning for an individual or a business. On top of it, donations made to any non-profit organization provide you an avenue for tax deductions.   
• Reduction in tax liability: Making a charitable donation is a great social responsibility and cause plus it helps you in reducing tax liability.
• Donations to government funds: There are certain government funds to which donations are available for tax deductions including the national child fund, national sports fund, national cultural fund, and many more. These funds are useful for saving taxes.   
• Claiming Deduction: Section 80G allows you to claim a deduction on taxable income if you donate to any eligible non-profit organization.
• A giving culture: Through section 80G a culture of giving is being promoted in India and therefore has become a crucial part and addition to tax saving.
• Spreading Awareness about Tax-Saving: In the segment of tax-saving, NGOs are playing a vital role in spreading awareness about tax-saving opportunities with the help of fundraising campaigns and their online platform.

Read Our Blog: How to Start an NGO in India

Importance of 80G Certification for NGOs

Let us now analyse the advantages of 80G registration for NGOs, which are listed below:

• Tax helps for contributors: Section 80G registration helps both organizations and their contributors. Donors who make contributions to organisations having an 80G certificate can deduct their taxable income. 
• Increased reputation: Like 12A registration, having an 80G certificate boosts the reputation of a non-profit organization. Donors frequently seek for groups with this certification because it ensures that their funds will be used for legal charity objectives.
• Attracting more funders: The 80G certificate enables organizations to reach a wider range of funders, including corporations and individuals. This extended donor network has the potential to greatly improve the organization's financial resources, enabling further growth.
• Transparency and Accountability: To maintain 80G registration, companies must follow specified reporting and transparency standards. This ensures that they operate with a high level of responsibility, which is comforting for donors and regulatory bodies.
• Increased Organisational Goodwill and Credibility: Having an 80G accreditation provides legitimacy and credibility to the organization. This improved reputation not only draws new donations, but it also builds trust with existing supporters. 
• Section 80G government funding: Registration improves access to They are more likely to be eligible for government grants, subsidies, and financial possibilities designed to encourage philanthropic actions.

Read Our Blog: Procedure for a Trust/NGO Registration

Conclusion

If you are donating to an NGO, you have the opportunity to save taxes while contributing to society. Through this article we have tried to educate you with basic concepts of 80G certification and how one can claim deductions under 80 G. We hope that we might have incorporated or at least made you aware of some tax saving tips along with slight motivation towards donating for charity.