NGO tax exemption, Tax benefits to Donors, 12A, 80 g, 35 ac (i & ii), (i & iii),

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.

Tax benefits to the Donors:

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?

Resident Indian:

1. Having taxable income in India and 2. Donating to a 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.)

Non Resident Indian:

3. Holding Indian Passport, 4. Donating to a 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.)

Deductions from total income with respect to donations made under sec. 80 g .

Deduction under Section 80 g is available to any tax payer (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 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.

Note: Proof of payment.

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 donation by cheque, pay order or demand draft rather than by cash. Donation in kind does not entitle any tax benefit.

Deduction with respect to eligible projects or scheme (Sec 35 ac)

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 from business or profession for promoting 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 ones business or professional income. No monetary ceiling with respect to the GTI is applicable for donations made under Section 35 ac one can donates up to 100% of ones income under this section.

Deduction in respect of certain donations for scientific research or rural development under sec 80 GGA.

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 donates up to 100% of ones income under this section.

SECTION 80 g ( An additional view ):

This section applies to donations to any institution or fund established in India for a charitable purpose and if it fulfills 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.

80 g Tax relief explained |35 ac Tax relief Explained

Difference between Trust and Society

The previous notes are only for knowledge and information. Before making or receiving donation, the donor and the ngo are advised to consult their chartered accountant or to seek professional advice.

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Useful NGO Books for NGO Management

Handbook for NGOs by Nabhi Publications

NGO Handbook (In Hindi)by Nabhi

Formation and Management of NGOs: Non Governmental Organisations by Anita Abraham

Formation and Management of NGOs (Non Governmental Organisations) - Universal Publication

How to start promote and manageNGO by Xcess

Handbook for NGO's and NPO's by Taxmann Publications Private Limited

NGO & Training Centre in India by Mantri Pragada Markandeyulu

NGOs in India: The challenges of women's empowerment and accountability (Routledge Contemporary South Asia Series)

Management of NGO's by Laxmi Publications

Interesting Issues on Charitable Trusts or Institutions NGOS & NPOS a Complete Guide to Frequently Asked Questions by CA N Suresh

NGO Management: With Case Studies by Surendra Publications


Useful books for TRUST formation and Management

Formation & Management Of A Trust by Nabhi's

Formation and Management of Charitable and Religious Trust Educational and Medical Institution under Income Tax Law by Universal Law Publishing co

All About Charitable Trusts - Formation, Registration, Management & Taxation of CHARITABLE & RELIGIOUS TRUSTS (With Free CD) by CA Virendra K. Pamecha , CA Rakesh Nahar

Formation and Management of a TRUST along with Tax Planning by Nabhi Publication



Useful books for Society formation and Management

Formation and Management of Societies (Telugu) by Pendyala Satyanarayana

Formation & Managements Of A Society by Nabhi

Formation & Management of a SOCIETY by Nabhi New

Formation and Management of Societies by Y. Kameshwara Rao

Formation and Management of a Co-operative Society alongwith Multi State Co-operative societies Act & Rules by Nabhi Board Of Editors


Useful books for NGO fundraising

Funding of NGOs: How to Manage by Mahaveer & Sons

Taxation of Trusts & NGOs by Taxmann

How to Start & Promote NGOs & NPOs in India Starting, Management & Funding of NGOs /NPOs Covering Schemes of the Ministries of Government of India by Xcess Infostore Pvt. Ltd.

Nonprofit: Starting a Charity - How To Successfully Change Lives, Give Aid & Build a Community (Contribution, Not For Profit, Fundraising, Startup, Donation, Volunteering, NGO Book 1)

Fundraising: 10 Tips to Raise Money for Ngos, Small Business and Non-profits

NonProfit Crowdfunding Explained: Online Fundraising Hacks to Raise More for Your NonProfit

Fundraising Techniques and Financial Assistance to NGO by Anmol Publisher

Guide To Fundraising and Public Relations For NGOs and Non Profit Organisations by CSIM




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