80G Registration under the Income Tax Act, 1961

Section 80G of the Income Tax Act, 1961, allows donors to claim tax exemptions for donations made to certain charitable organizations. This section provides a significant benefit by enabling donors to reduce their taxable income, encouraging charitable contributions. However, NGOs seeking this benefit must first obtain registration under Section 80G, which is not a one-time process and requires renewal after the validity period.

What is Section 80G?

Section 80G provides tax deductions to individuals and organizations who donate to eligible NGOs. Donors can claim deductions on their taxable income, thus reducing their overall tax liability. It is crucial for NGOs to have valid 80G certification to enable their donors to avail of this benefit.

Validity of Section 80G Registration

• Initial validity: The 80G registration is typically granted for a period of 1 to 3 years.
• Renewal: After the validity period, the registration must be renewed to continue the tax exemption benefits for donors.

Application Form for 80G Registration

• Form 10G is used for both new applications and renewals for 80G registration. This form must be submitted to the Income Tax Department.

Conditions for 80G Registration

NGOs must meet certain conditions to be eligible for registration under Section 80G:

1. No Business Income: The NGO must not have business income unless it is part of its charitable activities. If there is business income, it must maintain separate accounts and not use donations for business purposes.
2. Charitable Purpose: The bylaws or objectives of the NGO should ensure that income and assets are used solely for charitable purposes, and not for the benefit of any particular religious community or caste.
3. Record Maintenance: The NGO must maintain regular and accurate records of receipts and expenditures.
4. Legal Registration: The NGO should be properly registered either under the Societies Registration Act, 1860, or any equivalent law or under Section 25 of the Companies Act, 1956.
5. No Political Activity: The NGO must not engage in any political activities.

Tax Exemption Limits on Donations

• Limit on deduction: Donations to an NGO can be deducted up to 10% of the donor’s Gross Total Income. Any donation amount exceeding this limit will not be eligible for deduction under Section 80G.
• Deduction amount: The donation qualifies for a 50% deduction from taxable income, not the full amount. The exact benefit will depend on the applicable tax rate.

Documents Required for 80G Registration

When applying for registration under Section 80G, NGOs must submit the following documents:

1. Form 10A (for 12A registration) and Form 10G (for 80G registration).
2. Registration Certificate and Memorandum of Association (MOA) / Trust Deed (two copies, self-attested by the NGO head).
3. NOC from Landlord where the NGO’s registered office is located.
4. Copy of PAN card of the NGO.
5. Proof of address: Electricity bill, house tax receipt, or water bill.
6. Evidence of welfare activities: Progress reports or activity reports since inception or the last 3 years.
7. Books of accounts: Balance sheet, Income Tax Returns (ITR), and other financial statements for the last 3 years (if applicable).
8. List of donors with their PAN and addresses.
9. List of governing body members or trustees with contact details.
10. Original registration documents for verification.
11. Authority letter in favor of the consultant (if applicable).
12. Any other document or affidavit as requested by the Income Tax Department.

Where to Apply for Section 80G Registration?

Applications for 80G registration should be submitted to the Commissioner of Income Tax (Exemption) who has jurisdiction over the NGO’s location.

Can Section 12A and 80G Applications Be Applied Together?

Yes, both applications can be submitted together. However, it is advisable to apply for 12A registration first because it is a prerequisite for obtaining 80G certification.

Timeline for 80G Registration

• Typically, the registration process for both 12A and 80G takes about 3 to 4 months when applied through a consultant like NGO Factory.

Procedure for Obtaining 80G Registration

1. Step 1: Submit the duly filled application forms (Form 10A and 10G) to the Income Tax Department’s exemption section.
2. Step 2: After 2-3 months, the NGO may receive a notice from the Income Tax Department seeking clarifications.
3. Step 3: The NGO or its consultant must submit a response to the notice along with the required documents.
4. Step 4: The consultant will follow up with the Income Tax Department to ensure that the application is processed.
5. Step 5: Once the Income Tax Department is satisfied with the application, the NGO will receive the 80G Exemption Certificate.

Conclusion

Registration under Section 80G allows NGOs to provide tax benefits to their donors, which encourages charitable contributions. NGOs should ensure they meet all conditions, maintain proper records, and submit the required documents to obtain and renew their 80G certification. By following the outlined process, your NGO can benefit from the advantages of 80G registration, helping to secure more donations and maximize support for charitable causes.