A. BACKGROUND

Till the introduction of Form 10BD under the Income-tax Rules, there was no mechanism to validate or counter-check the deductions for donations claimed by the assessee under Section 80G and other sections. The deduction was allowed by the Income-tax department based on the claim of the assessee and at best based on the copy of the donation receipt. The objective beyond the introduction of this new form is to have more accountability, transparency in the reconciliation of deductions claimed with the donations received by the charitable organizations, thus eliminating bogus claims of deductions and misuse of the provisions by stakeholders.

By the introduction of this Form 10BD and issuance of a certificate in Form 10BE, the tax administration will be addressing two issues in one go i.e., correct reporting of donations by organizations and correct claim of deductions by the donors.

Authors note: This is could be done by ensuring that donations made by the assessee will appear in their Form 26AS and auto-population of the same while filing Income tax returns (ITR) by the donors. This is enabled by way of donations reported by the donation receiving organizations in the ITR form 7 under the schedule “voluntary donations”.

In this article an attempt has been made to create awareness about the objective behind the introduction of this form, the action points for reporting entities and donors (both corporate and individual donors), the details to be collected from a donor at the time of receipt of donations, the procedure for compliance post receipt of donations, consequences of non-compliance of these provisions, etc.

B. Objective of introducing this rule.

The objective of the introduction of Form 10BD i.e., Statement of Donation is to ensure accountability, transparency, curtailing of the incorrect claim of donations, putting an end to misreporting of donations by the entities which have obtained approval u/s 80G (5) of the Income Tax Act,1961 and entities which have obtained approval u/s 35(1) of the Income Tax Act, 1961. (The entities under the above sections could be research associations, universities, colleges, institutions, Section 8 companies, charitable trusts, etc). This will also ensure the elimination of incorrect or wrong claims of donation made by the donors. In this direction CBDT notified Form 10BD & Form 10BE vide notification no. 19/2021 dt 26th March 2021.

C. Effective date and applicability of the rule

The notification is effective from 01st April 2021. This new rule 18AB is applicable to all those entities who have approval u/s 80G and u/s 35(1) of the Income Tax Act,1961. Filing of Statement of donations (in Form 10BD) is mandatory in nature. A statement of donations for the financial year 2021-22 is required to be filed by 31st of May 2022.

D. Process of filing statement of donations and information to be collected.

Statement of donation (in Form 10BD) needs to be filed by donation receiving organizations electronically by using the digital signature of a person authorized to sign the return of income or needs to be filed through e-verification code (EVC). This statement has to be filed only once in a financial year. The last date for filing this statement for the financial year 2021-22 is 31st May 2022. These entities have to Collect all the requisite information from donors as and when a donation is received and maintain a list of donations. (Authors note – entities can maintain a register of donations in standard format).

The list of donations (or register) will be helpful at the time of filing a statement of donations. The details that should be collected from the donors are as follows:

Sl Details to be collected Points for consideration
1 Name of the donor Ask the donor to provide Nameas appearing in PAN or as per Income Tax records.
2 Address of the donor Advised to collect Latest address of the donor as per latest ITR filed or address of donor matches with identification proof collected.
3 Donation Type Corpus, Specific grant, others (could be general donations) this needs to be ascertained at the time of receipt of donations itself.
4 Mode of receipt

*Authors Note: Cash donation received in excess of Rs.2000/- are not eligible for 80G claim in hands of donor

Cash, Kind, online transfers (including cheque/drafts)

 

5 Amount of Donations Rupees
6 Unique Identification number of the donor–

PAN is a mandatory document to be collected in case of a resident donor.

This can be PAN, Aadhar, Taxpayer identification number of country where donor resides, passport number, election photo identity number, Driving license number, Ration card number.
7 Section Code Under which section the donation is covered namely 80G, 35(1)(ii), 35(1) (iia), 35(1)(iii),

After filing of Statement of Donations in Form 10BD, the reporting entity should download and issue Certificate of Donations in Form 10BE, which contains details of reporting entity like PAN and Name of the entity, address of entity receiving the donation, approval numbers u/s 80G & 35(1) along with details of donations and donor. For the financial year, 2021-22 Form 10BE is to be issued by 31st May 2022.

Authors note: Approval number is the recently issued alphanumeric number as per the recent approval (renewal obtained – which is valid for 5 years).

In case of any inadvertent errors or mistakes in Form 10BE, then there are provisions to rectify the errors or mistakes by filing a correction form (filing Form 10BD again with corrections), and hence additions, deletions, or modifications are possible.

In the event where donations are received from more than one person say husband and wife both contribute jointly, in such cases PAN & other details of husband and wife needs to be taken and donation needs to attributed to both in the ratio specified by donors, where no proportion is specified by the donors in such cases the donation is attributable equally.

Authors note – As per the notification, the email ID and mobile number of the donor are not mentioned as part of the information to be required for filing Form 10BD, however, the author advises the entities to collect both email id and mobile number so that Form 10BE could be emailed to the donor post-filing of Form 10BD. As there is every chance that the donor might assume that he has a donation receipt duly issued by the entity, which is sufficient to claim the exemption, sending this receipt through email will help the donor. If the entity inadvertently excludes donor name at the time of filing Form 10BD, then the only option left for a donor is to insist the entity to file a correction statement and furnish Form 10BE afresh.

E. The role of authorities in compliance of procedure.

As per the notification, the Principal Director General of Income Tax (Systems) or Director General of Income Tax (Systems) have been vested with responsibility for laying down.

a. Procedure and standards for furnishing and verifying the details to be filled in Form 10BD.

b. Procedure for allowing rectification of the details in the statement and submitting correction statement in Form 10BD.

c. Procedure, format, and standards for generating and downloading the certificates in Form 10BE.

It may be noted that as per the notification the due date for filing Form 10BD and the due date for the issue of the certificate of donation are the same. One may expect some change in this respect.

F. Consequences of Non-filing of Form 10BD

The reporting entity is mandated to comply with the filing of Form 10BD and failure to comply will attract a fee of Rs.200/- per day of delay as per newly inserted section 234G.

Apart from the fee for delay in furnishing statement of donations in Form 10BD, failure to file such statement will also attract penalty u/s 271K, which shall not be less than Rs.10,000/- and which may extend up to Rs.1,00,000/-

From the donor perspective, it is not just sufficient to obtain a donation receipt, but it is very much imperative to obtain a certificate of donation in Form 10BE after the end of the financial year. This is where the role of entities receiving the donations will be crucial as a certificate of donation has to be issued to all the donors in order to claim the deduction.

Source- Pursuant to Notification No. 19/2021 [F. No. 370142/4/2021-TPL] / GSR 212(E) dated 26thMarch 2021

Author Bio

Qualification: CA in Practice
Company: R V K S and Associates
Location: Bangalore, Karnataka, IN
Member Since: 20 Jul 2020 | Total Posts: 3
I am Practicing CA from Bangalore, I am Practicing in Direct Tax, Statutory Audit, Audit of Trusts and NGO View Full Profile

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6 Comments

  1. Balamurugan says:

    Does 10BE certificate of donation applicable for foreign donors as well?
    If so, the foreign donor information also need to be uploaded in 10BD right?
    Mandatory Identifier information applicable for foreign donors as well?

  2. Balamurugan says:

    Thank you for the detailed information.

    Few questions.
    1. Does the donation information automatically get reflected in 26AS of the donor or in incometax portal? How does the donor knows that the NGO missed to upload his information of donation.

    2. Can a donor avail 80g exemption by providing voter ID?

    3. Is it mandatory for NGO to communicate the certificate of donation to the donor?

    Thanks in Advance

    1. Thank you Balamurugan here are my replies to your queries
      1. since Form 10BD is filed electronically – I am of the view that it could appear in form 26AS and also may get auto-populated while filing an Income tax return by the donor.
      The donor needs to follow up and obtain a form 10BE certificate from NGO, if NGO fails to provide Form 10BE then either NGO has not filed Form 10BD or they have filed but missed including few donations where form 10BE is not generated. only upon following it up NGO one will come to know if they have filed or missed

      2. Providing PAN is mandatory for all the resident donors – by providing only voter ID the entity may not able to file Form 10BD. if one is contemplating claiming deduction u/s 80G then definitely PAN will be available, then I suggest you to provide PAN to claim deduction u/s 80G
      3. yes it is mandatory for NGO to issue Certificate of donation to all the donors

      1. Balamurugan says:

        Thanks Gopal for your answers

        Kindly check whether my below understanding are correct

        1. NGO should collect identity information for each donation.
        2. NGO should primarily collect PAN or Aadhar ID. In the absence of which other mentioned ids can be collected.
        3. PAN number is mandatory for donations more than Rs.50K
        4. A Donor can provide any of the mentioned IDs. However to claim tax exemption, he has to provide PAN or (Aadhar??)

  3. Yashodhan says:

    Thank you.
    A very detailed article covering all major aspects on donations functioning. I request to clarify few things as follows:
    1. Whether any upper cap on 234G like 234E where maximum amount is to the extent of TDS?
    2. Whether penalty is only on entity or on the officer incharge also?
    3. Beyond late fee and penalty whether prosecution mechanism is there?

    1. Thank you Yashodhan here my views on your queries
      1. as per provisions of section 234G(2)(a) -it states – the amount of fee shall not exceed the amount in respect to which the failure referred therein has occurred -going by this “Yes” it is similar to 234E.
      For example – say if an organization has received only Rs. 1000 as a donation and there is a delay of 6 days in the filing. Then as per Section 234G Rs.200 per day works out to Rs.1200, however the same is restricted to Rs.1000/- as per subsection 2 to section 234G
      2. as per the reading of section 271K – the penalty Without prejudice to the provisions of this Act, the Assessing Officer may direct that a sum, not less than ten thousand rupees but which may extend to one lakh rupees shall be paid by way of penalty by— research association, university, college….. etc in my view it is on the entity
      3. No prosecution is prescribed as it stands now.

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