Friday, May 19, 2023

Form 10BD reporting donations by Charitable Institutes and deductions claimed by donor

 

Understanding Tax Deductions for Donations: A Guide to Section 80G

Introduction:

When you donate money to a charity or NGO, not only are you supporting a noble cause, but you can also avail tax benefits under Section 80G of the Income-tax Act, 1961. This provision allows you to reduce the amount of tax you have to pay based on the donations you make. However, claiming this deduction has become more stringent in recent times, requiring donors to obtain a certificate from the recipient organization. In this article, we will explore the process of claiming tax deductions under Section 80G and the importance of the certificate of donation.

1.       The Significance of Donation Certificates:

To claim a tax deduction under Section 80G, you need to show proof that your donated money has been received by the charitable institution or NGO. Previously, donation receipts were accepted as proof, but now a certificate downloaded from the income tax department's e-filing portal is required. This certificate, akin to a TDS certificate, verifies your donation and the amount contributed.

2.       Filing a Statement of Donations:

To facilitate accurate tracking of donations, the charitable institution or NGO must file a statement of all donations received during a financial year. This statement, known as Form 10BD, is filed electronically on the income tax department's e-filing portal. It should be submitted on or before May 31 of the subsequent financial year. By requiring this statement, the income tax department ensures that the donations reported by the institution match the deductions claimed by taxpayers.

3.       Requirements for Claiming Deductions:

When filing your income tax return (ITR), you must provide the details mentioned in the donation certificate issued by the recipient organization. This information should be accurately entered in the relevant sections of your ITR form for the corresponding financial year.

4.       Process for Donee Institutions:

To initiate the process, the charitable institution or NGO must first file the Form 10BD statement on the income tax department's e-filing portal. Once the statement is filed, the institution can download the donation certificates (Form 10BE) generated from the portal. These certificates serve as proof of donation for taxpayers, and each certificate contains a unique Donation Reference Number (ARN), as well as relevant details of the donee, donor, and donation.

5.       Obtaining the Donation Certificate:

To claim a deduction under Section 80G, you, as the donor, must obtain the certificate of donation from the donee institution or NGO. This certificate should be downloaded from the income tax department's e-filing portal and cannot be manually created by the organization. It is crucial to note that simply making a donation and obtaining the certificate is not enough; you must claim the deduction in your income tax return.

6.       Compliance and Consequences:

If the donee institution fails to file the statement of donations (Form 10BD) or provide the certificate of donation (Form 10BE) to the donor, there are consequences. The institution may be charged a fee of Rs 200 per day for the default period, up to a maximum amount. Furthermore, a penalty of up to Rs 100,000 may be imposed under Section 271K. These measures ensure that institutions adhere to the necessary filing and documentation requirements.

Conclusion:

Claiming a tax deduction under Section 80G for your donations to charitable institutions or NGOs requires a systematic approach. By obtaining a certificate of donation and adhering to the filing guidelines, you can avail the benefits offered by the Income-tax Act. Remember to file the statement of donations in a timely manner and download the certificate from the income tax department's e-filing portal. This process not only ensures transparency but also helps you claim deductions hassle-free. By supporting worthy causes and maximizing your tax

 

Summarised Procedure for Donor

flowchart summarizing the process of claiming tax deductions under Section 80G:

1.       Donate money to a charitable institution or NGO.

2.       Obtain a donation receipt or certificate from the recipient organization.

3.       Verify that the organization is eligible for tax deductions under Section 80G.

4.       File your income tax return (ITR) and provide the details mentioned in the donation certificate.

5.       Check if the organization has filed a statement of donations (Form 10BD) electronically on the income tax department's e-filing portal.

6.       Ensure that the organization has issued a certificate of donation (Form 10BE) to you.

7.       Download the certificate of donation from the income tax department's e-filing portal.

8.       Verify that the downloaded certificate contains a unique Donation Reference Number (ARN) and accurate information about the donee, donor, and donation.

9.       Claim the deduction under Section 80G in your ITR by mentioning the ARN from the certificate of donation.

10.   Submit your ITR and supporting documents to the income tax department.

11.   Ensure compliance with the filing and documentation requirements to avoid penalties and fees.

12.   Receive tax benefits based on the approved deduction amount.

 

Procedure for Charitable Institutions to Enable Donors to Claim Tax Deductions under Section 80G:

1.       Register as a charitable institution or NGO: Ensure that your organization is registered and recognized as a charitable institution or NGO eligible to receive donations for tax benefits under Section 80G of the Income-tax Act, 1961.

2.       Obtain necessary information from donors: When individuals or entities make donations to your organization, collect the following information from them:

·         Donor's name, address, and contact details

·         Donor's Permanent Account Number (PAN) or other acceptable identity proof numbers (Aadhaar number, tax identification number, passport number, etc.)

·         Purpose of the donation (e.g., corpus, specific grant)

3.       File a statement of donations (Form 10BD): Electronically file a statement of all donations received by your organization during a financial year using Form 10BD. This should be done on the income tax department's e-filing portal. Ensure that the statement is filed on or before May 31 of the subsequent financial year.

4.       Generate and issue certificates of donation (Form 10BE): Once you have filed the statement of donations, the income tax department's e-filing portal will enable you to download certificates of donation (Form 10BE) for individual donors. These certificates should be generated and issued by May 31 of the following financial year.

5.       Include necessary details in the certificate: The certificate of donation (Form 10BE) should include the following information:

·         Amount of donation received from the donor during the financial year

·         Unique Donation Reference Number (ARN)

·         Donee institution's details

·         Donor's details

6.       Send the certificate to the donor: Provide the donor with the downloaded certificate of donation (Form 10BE). This can be sent via email or through another appropriate method. Ensure that the certificate is received by the donor.

7.       Maintain records: Keep a record of all donations received, statements filed, and certificates issued. Maintain proper documentation and organize it in a systematic manner for future reference and audit purposes.

8.       Ensure compliance and timely filing: Adhere to the filing deadlines and comply with the guidelines provided by the income tax department. Failure to file the statement of donations or issue the certificates within the specified timelines may result in penalties and fees.

9.       Assist donors with claiming deductions: Educate donors about the importance of using the certificate of donation (Form 10BE) while filing their income tax returns. Encourage them to accurately enter the ARN from the certificate in 'Schedule 80G' of the ITR form to claim the deduction under Section 80G.

10.   Stay updated: Keep track of any updates or changes in the regulations and guidelines related to claiming tax deductions under Section 80G. This will ensure that your organization remains compliant and provides accurate information to donors.

By following these steps, charitable institutions can facilitate the process for donors to claim tax deductions under Section 80G, promote transparency, and fulfill their responsibilities in line with the requirements of the income tax department.

 

procedures for both donors and charitable institutions (donees) to enable tax deductions under Section 80G:

Procedure

Donor

Charitable Institution (Donee)

Select a recognized charitable institution

Make a donation

Obtain a donation receipt or certificate

File income tax return (ITR)

Claim deduction under Section 80G

Register as a charitable institution

Collect necessary donor information

File a statement of donations (Form 10BD)

Generate and issue certificates of donation (Form 10BE)

Provide the certificate to the donor

Maintain records

Comply with guidelines and timelines

By following these procedures, donors can ensure they make eligible donations and claim tax deductions, while charitable institutions (donees) can facilitate the process and maintain compliance with the income tax department's requirements.