35 ac approval helps the nonprofit NGO organization, to encourage their donors towards fundraising for their specific approved social welfare projects and NGO issues donation certificate for tax exemption.
Under 35 ac, the donor who donates the nonprofit NGO organization for a specific social welfare project, gets 100% tax exemption for the amount, which they donated from their Gross total Income, after their various internal income deduction. There is no limitation for the donor to donate under section 35 ac.
When a nonprofit NGO organization receives donations under 35 ac sections it should provide a receipt to the donor, which makes them claim their tax exemption. Also, that receipt should be with the date, validity period of 35 ac, and the number of 35ac. The receipt which issued to the donor is FORM 58a which is also called a donation certificate.
This exemption is suitable only for the professional income peoples or business people. Other than business person or professionals, this 35 ac tax exemption will not be a valid one. So the people other than business or professional income shall claim the exemption under 80 GGA - [80GGA (2) (bb)] who are unable to claim tax exemption in any of the 35 ac related sections. In 80 GGA section also there is no limitation for the donors to donate. Please refer to your chartered person for the current notification of tax exemption to the donors.
In section 35 ac (i) (iii) the donor gets 125% tax exemption, which is suitable for the donors who are in business or who makes professional incomes. As this 35 ac (i) (iii) is approved only for the organization and institutions which undergo research and development in social sciences like Psychology, sociology, history, anthropology, economics, geography, civics, or statistical research organizations.
In section 35 CCB the donor gets 100% tax exemption as like 35 ac.
Example: Mr. Xyz is doing business and getting an income of Rs. 20,000 Rupees per month. He donates an organization in a month for Rs. 6000/- Now let's calculate his 35 ac tax exemption:
|Particulars||Amount in Rs.|
|Annual salary income of Mr. Xyz - Income tax on this Rs. 24,200||2,40,000|
|Gross Total Income of Mr.Xyz.||1,60,000|
|Less: Deduction under 35 AC on taxable income
( 100% of the donation amount )
|NET Income - Income Tax on this Rs.22,220||1,54,000|
|So the payable tax on Annual salary||24,200|
|Less: the payable tax after deduction under 35 AC||22,220|
|Actual tax relief to the donor (Mr. Xyz)||1980|
% of Taxable income may vary for a financial year. So consult with your Auditor or Tax Consultant to get accurate value. In this way you shall also calculate 125% tax exemption for the donors who donates under 35 ac (i) (iii)
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