Benefits & Procedure for Registration u/s 80G of Income Tax Act,1961

We have already discussed ‘Benefits of Registration u/s 12A of the Income Tax Act’ 1961’ and ‘Step by Step Procedure for Registration u/s 12A of the Income Tax Act, 1961’. In this article we are discussing Benefits and Procedure for Registration u/s 80G of the Income Tax Act’1961.

Important Points  related to Section 80G of Income Tax Act, 1961:

• It is important to note that when registration is granted under section 12A, it does not mean that section 80G approval has been given i.e. registration under section 12A will not provide automatic approval under section 80G. It has to be applied separately.
• Section 80G applies only to charitable trusts or institutions. It does not apply to religious trusts or institutions whereas scheme of exemption u/s 12A applies to both charitable as well as religious trusts.
• The applications for registration under section 12A and 80G can be applied together or they can also be applied separately.
• If trust is willing to apply both the applications separately, then application for registration u/s 12A has to be applied first as the registration u/s 12A is must for applying for registration u/s 80G of the Income Tax Act.

Benefits of Registration under Section 80G:

Section 80G of the Income Tax Act’1961 provides deduction while computing the total income in the hands of donor. It provides deduction in respect of donations to certain funds, charitable institutions, etc.

The recipient of money or the donee gives a receipt of donation, based on which the donor is entitled to claim a deduction, provided the donee institution is approved under section 80G of the Income Tax Act’1961.

The Supreme Court of India in the case of H.H. Sri Rama Verma vs Commissioner of Income Tax held that Donations in kind do not qualify for deduction under section 80G.

Explanation 5 to Section 80G reads as under:

For the removal of doubts, it is hereby declared that no deduction shall be allowed under this section in respect of any donation unless such donation is of a sum of money.

Conditions to be satisfied to get approval under Section 80G

Section 80G (5) prescribes certain conditions to be satisfied to get the approval u/s 80G:

♠ The Institution should be established in India for Charitable purpose.

♠ If the Institution or fund is deriving any income, such income should not be liable to inclusion in its total income under the provisions of sections 11and 12 or clause (23AA) or clause (23C) of section 10.

♠ If the institution or fund derives any income, being profits and gains of business, the condition that such income would not be liable to inclusion in its total income under the provisions of section 11shall not apply in relation to such income, if:

(a) the institution or fund maintains separate books of account in respect of such business;

(b) the donations made to the institution or fund are not used by it, directly or indirectly, for the purposes of such business; and

(c) 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 the purposes of such business;

♠ The instrument under which the institution is constituted shall not contain any provision for transfer or application of the income or asset for any purpose other than a charitable purpose.

♠ The institution should not be for the benefit of any particular religious community or caste.

♠ The institution should maintain regular accounts of its receipts and expenditures.

♠ The institution should be either constituted as a Public Charitable Trust or a registered society or a company registered u/s 8 of the Companies Act’2013 or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law, or is an institution financed wholly or in part by the Government or a local authority.

Procedure for Registration under Section 80G:

Rule 11AA of the Income Tax Rules’1962 provides procedure for seeking approval under section 80G.

1. The application for approval of any institution shall be made in form no. 10G which shall be verified by the person who is authorised to verify the return of income under section 140, as applicable to the assessee

2. Form No. 10G shall be furnished electronically,—

(i) under digital signature, if the return of income is required to be furnished under digital signature; or

(ii) through electronic verification code in a case not covered under clause (i).

(3) The Principal Director General of Income-tax (Systems) or the Director General of Income-tax (Systems), as the case may be, shall lay down the data structure, standards and procedure of furnishing and verification of Form No. 10G and shall be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to the said form so furnished.

(4) The Principal Commissioner or Commissioner may call for such further documents or information from applicant or cause such inquiries to be made as he may deem necessary in order to satisfy himself about the genuineness of the activities of the applicant.

(5) Where the Principal Commissioner or Commissioner is satisfied that all the conditions laid down in section 80G(5) are fulfilled by the applicant, he shall record such satisfaction in writing and grant approval under clause (vi) of sub-section (5) of section 80G.

(6) Where the Principal Commissioner or Commissioner is satisfied that one or more of the conditions laid down in section 80G(5) are not fulfilled, he shall record the reasons in writing and reject the application for approval after giving the applicant an opportunity of being heard.

Time Limit of Passing Order:

The order granting approval under section 80G(5) or rejecting the application shall be passed within the period of six months from the end of the month in which such application was received.

In computing the period of six months, any time taken by the applicant in not complying with the directions of the Commissioner shall be excluded.

Important Note:

Amendment by Finance Act’2017

“No deduction shall be allowed under this section in respect of donation of any sum exceeding TWO thousand rupees unless such sum is paid by any mode other than cash.”

Finance Act 2017 amended section 80G so as to provide that no deduction shall be allowed under the section 80G in respect of donation of any sum exceeding Rs. 2,000/- unless such some is paid by any mode other than cash. Earlier this limit was 10, 000/-.Government has taken this step in order to provide cash less economy and transparency

ANNEXURE :1  {SOURCE: INCOME-TAX RULES’1962}

FORM NO. 10G

[See rule 11AA]

Application for grant of approval or continuance thereof to institution or fund under section 80G(5)(vi) of the Income -tax Act, 1961 

1. Name of the institution/fund in full (in block letters)

2. Address of the registered office of the institution/fund

3. Legal status [please specify whether the institution/fund is

(i) constituted as public charitable trust;

(ii) registered under the Societies Registration Act, 1860 (21 of 1860) or under any law corresponding to that Act in force in any part of India;

(iii) registered under section 25 of the Companies Act, 1956 (1 of 1956);

(iv) a University established by law;

(v) any other educational institution recognized by the Government or by any University established by law or affiliated to any University established by law;

(vi) an institution wholly or partly financed by the Government or a local authority;

(vii) an institution established with the object of controlling, supervising, regulating or encouraging games or sports and is approved for this purpose under section 10(23); or

(viii) a Regimental Fund or Non -Public Fund established by the armed forces of the Union for the welfare of past or present members of such forces or their dependents.]

4. Objects of the institution/fund and geographical area over which its activities are undertaken

5. Names and addresses of trustees/office bearers of the institution or fund

6.

(i) If registered under section 12A(a) of the Income-tax Act, the registration number and date of registration

(ii) If notified under section 10(23) or under section 10(23C) of the Income-tax Act, the details thereof

(iii) If responses to (i) & (ii) are negative, whether any application for the same has been filed? If yes, enclose a copy of the same.

9.

(a) Period of last approval, if any. Please enclose a copy of the approval

(b) If any change in the aims and objects and the rules and regulations have been made since the last approval, the details thereof

8. Assessment particulars

(a) Ward/Circle where assessed and permanent account number/GIR number

(b) Is the income exempt under section 10(22), 10(22A), 10(23), 10(23AA), 10(23C) or 11?

(c) Whether any arrears of taxes are outstanding? If so, give reasons

9. Amount accumulated for the purposes mentioned in item (4) above

10.

(i) Details of modes in which the funds are invested or deposited, showing the nature, value and income from the investment;

(ii) Whether any funds have not been invested in the modes specified in section 11(5)?

11.

(i) Is the institution/fund carrying on any business? If yes, give details

(ii) Is the business incidental to the attainment of its objects?

12. Details of nature, quantity and value of contributions (other than cash) and the manner in which such contributions have been utilized.

13. Details of shares, security or other property purchased by or on behalf of the trust from any interested person as specified in sub-section (3) of section 13.

14. Whether any part of the income or any property of the association was used or applied in a manner which results directly or indirectly in conferring any benefit, amenity or perquisite (whether converted into money or not), on any interested person as specified in sub-section (3) of section 13? If so, details thereof.

15. I certify that information furnished above is true to the best of my knowledge and belief. I undertake to communicate forthwith any alteration in the terms or in the rules governing the institution/fund made at any time hereafter.

Place:

Date:

Signature:

Designation:

Address:

Notes: The application form (in triplicate) should be sent to the Commissioner of Income-tax having jurisdiction over the institution or fund along with the following documents:

(i) Copy of registration granted under section 12A or copy of notification issued under section 10(23) or section 10(23C).

(ii) Notes on activities of institution or fund since its inception or during the last three years, whichever is less.

(iii) Copies of accounts of the institution or fund since its inception or during the last three years, whichever is less.

(Submitted by – Tarun Kumar (B.Com, ACA) Mobile: +91-888-282-8112- Email-ID: [email protected])

(Republished with Amendments)