When you donate money to a charity or NGO, you can get a tax deduction under Section 80G of the Income-tax Act, 1961. This means that you can reduce the amount of tax you have to pay based on the amount you donated.
But now, to claim this deduction when you file your income tax return (ITR), you need a certificate from the charity or NGO you donated to. This certificate is like a TDS certificate, which shows that you made the donation and the amount you donated. You can download this certificate from the income tax department's e-filing portal.
So, to sum it up, if you want to get a tax deduction for donations you made to a charity or NGO, make sure to get a certificate from them and download it from the income tax department's e-filing portal when you file your tax return.
How to claim Section 80G deduction: Proof required?
To claim a tax deduction under Section 80G of the Income-tax Act, you need to show proof that the money you donated to a charitable institution or NGO has been received by them. Earlier, you could claim deductions based on donation receipts issued by the institution, but now you need a certificate downloaded from the income tax portal by the donee institution or NGO. This new process helps to ensure that donations received by charitable institutions are matched with the deductions claimed by taxpayers. The charitable institution must file a statement of all donations received by it in a financial year to the Income-tax department and issue separate certificates to the donors, who can claim the deduction only based on this certificate.
Requirement to file Statement of Donations
To claim the deduction under Section 80G, the NGO or charitable institution must file a statement of donation in Form 10BD electronically on the income tax department's e-filing portal. This statement should be filed on or before May 31 of the financial year immediately following the year in which donation was received. For instance, if an NGO received a donation in FY 2022-23, then the statement of donation in Form 10BD for this donation must be filed on or before May 31, 2023. Additionally, the donor must provide the details mentioned in the donation certificate while filing their ITR for the relevant financial year.
To claim a deduction under Section 80G while filing income tax return (ITR), the donee institution or NGO must first file Form 10BD statement on the income tax department's e-filing portal. After filing the statement, the donee institution must download the donation certificates from the portal, which are generated only after the Form 10BD is filed. These certificates serve as proof of donation for the taxpayer, similar to TDS certificates. Therefore, the taxpayer needs to obtain the donation certificate from the donee institution or NGO to claim the deduction under Section 80G while filing ITR.
To enable donee institutions to file statements of donations, donors are required to provide their name, address, and identity proof to the institution.
A copy of the donor's PAN and Aadhaar is preferred, but other identity proof numbers can be used as well. The acceptable identity proof numbers for filing Form 10BD (statement of donations) are:
- Permanent Account Number (PAN)
- Aadhaar Number
- Tax Identification Number
- Passport Number
- Elector's photo identity number
- Driving License Number
- Ration card Number
In addition to providing personal information, the donor must also state the purpose of their donation, such as a corpus or specific grant. It's important to remember that simply making a donation and obtaining a certificate of donation does not automatically qualify a person for a deduction. The donor must claim the deduction in their income tax return, and the donation must be in the form of money. Donations made in kind are not eligible for deduction under Section 80G. Deductions can only be claimed for donations made through cash, cheque, or electronic modes. However, cash donations exceeding Rs. 2,000 are not eligible for a deduction.
Issuance of certificate of donations
Once the statement of donations is filed by the donee institution, they must provide the donor with a certificate of donation in Form 10BE, which specifies the amount of donation received during the year. This certificate is proof that can be used to claim a deduction under section 80G. The certificate of donation in Form 10BE must be issued by May 31 of the financial year immediately following the year in which the donation was received. The donee institution should file Form 10BD in advance to allow time for generating and sending the Form 10BE to the donors.
The generation of the Certificate of Donation is dependent on the e-filing portal
Once an organization has uploaded Form 10BD on the income-tax e-filing portal, it can retrieve the donation certificate (Form 10BE) for each individual donor. This certificate should be sent to the respective donors by the organization via email or another appropriate method. The downloaded Form 10BE from the e-filing portal is the only valid certificate of donation, and it includes a unique Donation Reference Number (ARN), as well as information about the donee, donor, and donation. The donor should mention this ARN in 'Schedule 80G' while claiming the deduction under Section 80G in the ITR form. It's essential to note that the certificate of donation must be downloaded from the e-filing portal and cannot be created manually by the organization.
Consequences of Non-Compliance
If the donee institution fails to file the statement of donations in Form 10BD or does not provide the certificate of donation to the donor in Form 10BE, there are consequences. The donee institution will be charged a fee of Rs 200 per day for the period of the default, up to a maximum amount. The fee must be paid before filing the statement of donation or issuing the certificate of donation. Additionally, a penalty of Rs 10,000 may be levied under Section 271K if the donee institution fails to furnish the statement of donation or issue the donation certificate. This penalty can increase up to Rs 100,000.
Conclusion
To claim a deduction under Section 80G, it is essential to obtain a donation certificate from the charitable institution or NGO where the donation has been made. The donee institution must file the statement of donation in Form 10BD and issue the certificate of donation in Form 10BE generated from the e-filing portal on time to avoid any fees or penalties. The Form 10BE certificate is crucial for the donor to make a hassle-free deduction claim under section 80G.
The author is a Chartered Accountant with 2 decades of experience into Accounting, Taxation, Auditing, Risk & Compliance, Credit Controls, Due diligence. Currently, the author is the founder and managing partner at RRL Global services.
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