NGO tax exemption and Tax benefits to Donors for the donation made to a NGO through 12A, 80 g, 80GGA, 35 ac (i & ii), (i & iii), 80CCC, 80U, 35 ac, 115A, 115AB, 115AC, 115AD, and 115D for charitable purpose.
A donor, who is a resident of India and a non resident Indian holding a Indian Passport and also having taxable income in India, can claim income tax benefit from the donation made to a NGO, which registered with Income tax department through 12A, with tax exemption status under section 80 g, 80 GGA, 35 ac (i & ii), (i & iii) of the Income Tax Act of 1961. Who qualifies for the Tax Benefits?
1. Having taxable income in India and 2. Donating to an NGO that is having valid tax exemption certificate under section 80 g, 80 GGA or 35 ac of the Income tax Act of 1961 of India. (The exemption certificate granted to the NGO by the Commissioner states the approval number and the period of approval under the said Sections.)
3. Holding Indian Passport, 4. Donating to an NGO that is having valid tax exemption certificate under section 80 g, 80 GGA or 35 AC of the Income-tax Act of 1961 of India. (The exemption certificate granted to the NGO by the Commissioner states the approval number and the period of approval under the said Sections.)
Deduction under Section 80 g is available to any taxpayer (may be individual, company, firm or any other person) - Monetary Limits with respect to Donations made.
There are few restrictions on the amount of donation that qualifies for deduction under sec 80 g.
Some donations qualify only up to the limit of 10% of the Gross Total Income - GTI. If the amount of donation made exceeds 10% of the GTI the excess has to be ignored for deduction. Again within the overall limits of 10% of GTI, some donations qualify for the deduction at the rate of 100% and some qualify at the rate of 50%.
A. Donations to the following for which 10% ceiling of the Gross Total Income applies and for which the donor is entitled 50 % deduction of the sum donated.
Any NGO, fund or institution established in India for a charitable purpose, which satisfies conditions mentioned in Section 80 g (5)
B. Donations to the following for which 10% ceiling of the Gross Total Income does not apply and for which the donor is entitled 100 % deduction of the sum donated.
Government or any approved NGO, local authority, institution or association to be used for promoting family planning.
The taxable income referred to, is the Adjusted Gross Total Income. Adjusted Gross Total Income for this purpose is the gross total income as reduced by the following:
A. Amount deductible u/s 80CCC to 80U (but not 80 g) B. Such sums on which income tax is not payable. C. Long-term capital gains. D. Incomes referred to in sections 115A, 115AB, 115AC, 115AD, and 115D.
1. Proof of payment must be submitted to claim the deduction. However simply because the receipt which is produced before the Assessing Officer is defective (not affixed with revenue stamps) it does not automatically invalidate the donation itself. 2. It is always advisable to make a donation by cheque, pay order or demand draft rather than by cash. Donation in kind does not entitle any tax benefit.
Deduction is available under section 35 ac at 100% of the amount contributed from the taxable income of the assessee under the head profits and gains of business or profession for promoting the social and economic welfare or upliftment of the public. Any taxpayer being a Company or a person other than a Company can claim deduction under Section 35 ac.
The claim for deduction should be supported by an audit certificate obtained from the approved NGO to whom the payment is made, in Form No.58A. Eligible projects mean such project or scheme for promoting the social and economic welfare of, or the upliftment of, the public as the Central Government may, by notification in the Official Gazette, specify in this behalf on the recommendations of the National Committee.
If the NGO is recognized under Section 35 (i) (iii), that is, NGO engaged in scientific research, research in social sciences and statistical research, the donor gets 125% deduction of the sum donated for donations made from one's business or professional income. No monetary ceiling with respect to the GTI is applicable for donations made under Section 35 ac one can donate up to 100% of one's income under this section.
An assessee (other than an assessee whose Gross Total Income includes income chargeable under the head " Profits and gains of business or profession ") is entitled to deduction in the computation of his total income with respect to payments / donations made to a NGO for carrying out scientific research, research in social sciences, statistical research and program of rural development including training of persons for carrying out program of rural development. No monetary ceiling with respect to the GTI is applicable for donations made under Section 80 GGA. One can donate up to 100% of one's income under this section.
This section applies to donations to any institution or fund established in India for a charitable purpose and if it fulfils the following conditions:
1. The institution or fund maintains separate books of account in respect of such business, The donations made to the institution or fund are not used by it, directly and indirectly, for such business, and The institution or fund issues to a person making the donation a certificate to the effect that it maintains separate books of account in respect of such business and that the donations received by it will not be used, directly or indirectly, for such business.
2. The instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund, do not contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose.
3. The institution or the fund is not expressed to be for the benefit of any particular religious community or caste.
4. The institution or fund maintains regular accounts of its receipts and expenditure.
5. The institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 or under any law corresponding with that Act in force in any part of India or under section 25 of the Companies Act, 1956.
The previous notes are only for knowledge and information. Before making or receiving the donation, the donor and the NGO are advised to consult their chartered accountant or to seek professional advice.