How to register your NGO under sec.80G of Income Tax Act 1961? By Sanjay Kumar Jha NGO Guru What is section 80G? • If, an organization has obtained certificates under section 80G of Income tax Act, 1961, then the donors to the NGO, can claim exemption from their individual Income. • Registration under section 12A(a) and section 80G, can be applied and obtained together but, generally the offices of several commissioner, first issue registration under section 12A (a), thereafter grant, registration under section 80G. By Sanjay Kumar Jha NGO Guru Documents / Papers, required to be submitted for registration under section 80G. • Covering letter • Form 10G, duly filled & signed. • Copy of registration under section 12A (a) of Income Tax Act 1961 (obtained before, applying separate for registration under 80G). • Up-to-date Income Tax Return ITR-7 [if 12A registered]. • Audited Financial Statements (updated). • Annual Report of Financial, and Physical Performance and Statutory Compliance. • Proof of activities. • List of donors (with details). • List of Governing body. By Sanjay Kumar Jha NGO Guru Registration is granted in following steps:Step 1 :- Once the application is made, wait until you receive Notice from department within six (6) months. Step2 :- The notice requires the NGO to appear before Income tax authority with books of accounts/ original requisite documents, vouchers, and other records . Step 3 :- On examination of the evidences and books of accounts & being satisfied, The commissioner issues certificate under section 80G of Income Tax Act,1961. By Sanjay Kumar Jha NGO Guru Conditions on section.80G • The NGO should not have any income which are not exempted such as BUSINESS INCOME (if any). • If, the NGO has business income then it should maintain separate books of accounts and should not divert donations received , for the purpose of such business. • The byelaws of the NGOs should not contain any provision for spending Income or Assets of the NGO for purpose other than charitable, for the benefit of the public at large. • The NGO is not workings for the benefit of particular religious community or caste. • NGO should maintain all statutory, financial and activities papers /documents, properly supported with the true form of Receipts /Payment /Assets / Liability /Capital of the NGO. By Sanjay Kumar Jha NGO Guru Contd.. • Object to establish schools for Muslim to teach Urdu, Arabic etc. which is charitable in nature not religious. • No part of the income should be applied, directly or indirectly, for the benefit of the settler or other specified persons. • The property of NGO, should be held wholly for charitable purpose. • If the commissioner is satisfied that the activities of any NGO are not genuine or not carried out in accordance with the objectives of the NGO. The commissioner shall pass order in writing (after providing an opportunity of being heard to the concern NGO), Cancelling the registration granted under section 12A and 80G . By Sanjay Kumar Jha NGO Guru Important Note:• Anonymous donation will not be eligible for deduction under section 11 and 12, from the assessment year 2007-08: All anonymous donations are taxed @30% under section 115 BBC.  There in levy of tax at maximum marginal rate of tax exemption.  In the case the NGO do not invent, their investment pattern other then forms/Modes, as specified under section 11(5) of income Tax. By Sanjay Kumar Jha NGO Guru Q. WHAT IS TAX EXEMPTION LIMIT UNDER SECTION 80G ON DONATION? • There is a limit on maximum amount of exemption under section 80G and deduction admissible under this section, the three steps, have to be observed to any tax payer (may be individual firm, HUF, Company):Step 1 :- Find out gross qualifying amount. Step 2 :- Find out net qualifying amount. Step 3 :- Find out the amount deductible.  If the amount of deduction to an NGO is more than 10% of the gross total income computed under the Act ,that the amount in excess of 10% of gross total Income shall not qualifying ,for deduction under 80G.  The donor under section 80G, will get a deduction of 50% from their taxable Income. Here at times, a confusion creeps in, that the tax advantage under section 80G is 50%, But actually it is not so . 50% of donation made is allowed to be deducted from taxable income and accordingly the tax is calculated. By Sanjay Kumar Jha NGO Guru Computational details regarding deduction under section 80G • In some cases, there is no maximum limit for the deduction which can be claimed for donations made under section 8OG. • However, in some cases deduction on donations under Section 80G is limited to 10% of the Adjusted Gross Total Income of the taxpayer. By Sanjay Kumar Jha NGO Guru By Sanjay Kumar Jha NGO Guru The adjusted gross total income of a taxpayer for the purpose of section 80G is computed as follows: Particulars Amount Gross Total Income xxx (Less) Long Term Capital Gains xxx (Less) Short Term Capital Gains on Sale of Shares u/s 111A xxx (Less)Deductions under Section 80C to Section 80U xxx (=) Adjusted Gross Total Income Less) Deduction under Section 80G* (=) Total Taxable Income xxx Xxx Xxx *** Deduction under Section 80G is limited to a maximum of 10% of the Gross Total Income. By Sanjay Kumar Jha NGO Guru Eligibility of Donations • Donations eligible for Full Deduction • • • • • • • • • • • • • • • • • • National Defence Fund set by the Central Govt. Prime Minister's National Relief Fund Prime Minister's Armenia Earthquake Relief Fund National Foundation for Communal Harmony University/ Education Institution of National eminence approved by the prescribed authority Maharashtra Chief Minister's Earthquake Relief Fund Any Fund set-up by the State Govt of Gujarat, exclusively for providing relief to the victims of earthquake of Gujarat Zila Saksharta Samiti constituted in any district National Blood Transfusion Council or any State Blood Transfusion Council Any fund set up by the state Govt to provide Medical Relief to the poor Army Central Welfare Fund or Indian Naval Benevolent Fund or the Air Force Central Welfare Fund National Illness assistance Fund Andhra Pradesh Chief Minister's Cyclone Relief Fund Chief Minister Relief Fund or the Lieutenant Governor's Relief Fund in respect of any State or Territory National Sports Fund set up by the Central Govt National Cultural Fund set up by the Central Govt Fund for Technology Development and Application, set up by the Central Govt National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities. By Sanjay Kumar Jha NGO Guru Eligibility of Donations • Donations eligible for 50% Deduction:• • • • • • • • • • • • • • • • • • National Defence Fund set by the Central Govt. Prime Minister's National Relief Fund Prime Minister's Armenia Earthquake Relief Fund National Foundation for Communal Harmony University/ Education Institution of National eminence approved by the prescribed authority Maharashtra Chief Minister's Earthquake Relief Fund Any Fund set-up by the State Govt of Gujarat, exclusively for providing relief to the victims of earthquake of Gujarat Zila Saksharta Samiti constituted in any district National Blood Transfusion Council or any State Blood Transfusion Council Any fund set up by the state Govt to provide Medical Relief to the poor Army Central Welfare Fund or Indian Naval Benevolent Fund or the Air Force Central Welfare Fund National Illness assistance Fund Andhra Pradesh Chief Minister's Cyclone Relief Fund Chief Minister Relief Fund or the Lieutenant Governor's Relief Fund in respect of any State or Territory National Sports Fund set up by the Central Govt National Cultural Fund set up by the Central Govt Fund for Technology Development and Application, set up by the Central Govt National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities. By Sanjay Kumar Jha NGO Guru With Regards Sanjay kumar Jha NGO Guru NGO Helpline 208,Jagat Trade Centre, Fraser Road, Patna-1 [Bihar] By Sanjay Kumar Jha NGO Guru