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Introduction of 12a 80g registrationIncome Tax Act, Section 80G deals with donations made towards charity, to provide tax incentives to individuals indulging in charitable activities. This section offers tax deductions on donations made to certain funds or charities. An amount donated by an individual to an eligible charity can be claimed as a tax deduction while filing an income tax return. If your NGO doesn’t have a 12A certificate, then it will be entitle to normal tax rates. So if you want your NGO to receive the benefit of income tax exemption, then you must get a 12A certificate for it.
Eligibility of 12a 80g registrationAll taxpayers (individuals/companies/Hindu Undivided Families) are eligible to make donations to charity under Section 12a 80g registration and claim a deduction, subject to limits set down by the government. NRIs donations are eligible to trusts or institutions and are also entitled to the benefits under Section 80G. Certain Charitable Trusts, Religious Trusts, Societies and companies which come under Section 8 are eligible for 12A registration and it is not applicable for Private or Family Trust.
Donations PermittedIndividuals who wish to claim deductions under section 80G need to ensure that the organization they are donating to falls under the overview of this Act. Only those donations are suitable for deductions which are registered under valid funds or charitable institutions. Trusts and charities need to be registered under Section 12A post which they qualify for the 12a 80g registration certificate. Individuals are advised to check the credentials of an organization before donating to it.
ExemptionsNot all donations made by an individual qualify for deductions under Section 80G. Donations made to foreign trusts and political parties are not covered under the ambit of this section and individuals cannot claim tax deductions for such donations.
The scope of DeductionThere are certain basic criteria which must be met for a donation to be valid under Section 80G. Some of the major points are mentioned below.
- Donations made through other non-taxable income sources do not qualify for the deduction. So, donations should be paid through taxable income.
- Only that kind of Donations is eligible which are paid either by cash or cheque
- Donations made in the form of clothes, food, medicines, etc. not eligible under Section 80G.
- Partnership deed in case the applicant is a partnership entity.
- Only valid and registered trusts donation qualify for deductions.
- Donation made to foreign institutions and political parties are exempt from deductions.
Documents Required to Claim Deduction under Section 80GIndividuals wishing to claim deduction under Section 80G need to have the following documents to support their claim of 12a 80g registration.
- Duly Stamped Receipt: It is mandatory to have a receipt issued by the trust/charity which receives a donation.
- Form 58:If the donor intends to claim 100% deduction on a donation than it is essential to file form 58, without which their donation will not be eligible for 100% deduction.
- Registration Number of Trust: Registration number by Income Tax Department is provided to each eligible trust and donors should ensure that their receipt contains this number.