What is 80G Certificate? How to apply for it?

A certificate that exempts the taxpayer partially or fully from paying taxes when the taxpayer has made payments as donations to charitable trusts or to the companies under Section 8 or to those organisations that offer exemptions from taxes. For instance, a charitable trust that is registered under 12A, will grant you an exemption from taxes under Section 80G. But there is a maximum limit for deduction under this criteria.

The criterion for deduction states that if the donated amount is more than 10% of the gross total income, then the excess amount does not qualify for taxation benefit.  An 80G Certificate was introduced in the law book in 1967-68 and is still an essential certificate that helps in tax saving. The following entities are free to access tax saving under Section 80G using an 80G Certificate:

• A taxpayer who has made a donation that fits the eligibility criterion can avail exemptions under Section 80G using an 80G Certificate.
• Those donations that are made to only those trusts and organisations that are listed for deductions under Section 80G.

Who does not qualify for Tax exemptions under Section 80G?

The following entities do not qualify for tax exemptions under Section 80G:

• When donations are made to trusts that are based in foreign do not qualify for tax deductions under Section 80G.
• In case donations are made to one or many political parties, such donations do not qualify for tax deductions. No deductions can be claimed for printing or publishing of flyers or pamphlets or brochures.
• In case donations are made by NRIs to eligible trusts or organisations, such donations qualify for tax exemptions as per the guidelines of Section 80G.
• In case an employee makes a donation from his salary and has his name on the donation receipt, then he is free to claim deductions under Section 80G.

Percentage deductions allowed under Section 80G

• 100% exemption is availed for those payments that are made to the Prime Minister Relief Fund without any limits under Section 80G
• 50% deduction is availed on those payments which are made to trusts like the “Indira Gandhi Memorial Trust” without any limits under Section 80G
• 100% exemption is allowed on payments that are made to approved institutions these institutions are dedicated to promote and encourage family planning
• 50% deduction is allowed on those payments which are made to listed charitable trusts under Section 80G.

Documents required for claiming deductions under Section 80G

1. In order to claim deductions under Section 80G, stamped receipts are required. This receipt needs to be compulsorily issued by the recipient trust. The receipt should contain the following:
   1. Address, Name and PAN Card number of that trust to which the donation was made.
   2. Name of the donor
   3. The donated amount in numbers as well as in words
   4. When donations attracting 100% deductions are made, then the trust should be asked for FORM 58 which contains the details of the authorised as well as the collected amount. Without it the claims made for 100% exemption will not be accepted.
2. The registration number that is provided to the trust under Section 80G
   1. It is crucial to mention the registration number which is issued by the IT Department under Section 80G. It should be printed on the receipt along with the validity of the registration.
   2. A photocopy of the 80G Certificate is also required along with the receipt.

Eligible modes of payment for deductions of Tax

• Those donations that are made as gifts are not eligible for tax exemptions. Also, the donations made for people during a natural disaster do not qualify for tax benefits.
• Only those payments which are made in cash or via a cheque are eligible for tax deductions
• The donations that are made by the employees directly from their salary with their names on the receipt, will qualify for tax exemptions under Section 80G.

Compliance Requirements for 80G registration

1. Only a public charitable trust, an institution that is funded by the government, a registered society or a recognized educational institution make an application
2. The applying trust or organisation should be registered under the Societies registration act or under Section 25 of the Companies Act
3. Applicants should not be involved in any religion-based or caste or creed based activities
4. The trust should perform charitable functions only by utilising the donated funds
5. The registered trust should not possess any income that is not exempted
6. Entities having other businesses should maintain separate accounts so that the amounts of donations do not confused with others
7. The applicant needs to maintain adequate annual returns, book keeping and accounting when applying for the 80G certificate.

Process to acquire an 80G Certificate

The registration is processed by the Commissioner of Income Tax when he receives an application in Form 10G from the applicant. The following documents should also be provided along with the application:

1. Registration certificate
2. MOA/Trust Deed
3. NOC for the land owner where the registered office is present
4. Copy of Trust’s PAN Card
5. A Copy of water bill or house tax receipt or electricity bill
6. Evidence of pursued welfare activities
7. Progress report of the NGO either from its foundation or for the last three years
8. Statements of accounts and balance sheets either since its foundation or for the last three years
9. A List of those contributors containing their address and PANs
10. List of trustees who belong to the governing body along with their contact details
11. Copy of registration provided under Section 12A

The certificate will be issued when the Commissioner of IT Department passes a written order which will register the entity under Section 80G of the Income Tax Act. It is also possible that the commissioner demands for more documents in case the application may get rejected. This registration will be valid for a time period of one to three years.

Conclusion

In this blog, we came to know about Section 80G of the Income Tax Act and about the 80G Certificate. We learnt about the eligibility criteria to register for 80G Certificate and who can not register for the 80G Certificate. We also came to know about the compliance requirements and documents that are required to register for an 80G Certificate and the process to register and acquire the 80G Certificate.