Section 80G of Indian Income Tax - For NGO's

In the Previous Article, we saw what the Section 80G is and how as tax payers we can utilize this section and reduce our tax liability by donating to qualified institutions. Any NGO in India, that is Registered under Section 80G, then donations done to that NGO by individuals is Exempt from Income Tax. This article is about, what an NGO has to do to qualify for this section.

Note: I know of a few friends who run small NGO's that help out the people in need in their localities. This article will be useful to those noble souls.

Section 80G for NGO's

As you might already know, an NGO can avail income tax exemption by getting itself registered and complying with certain other formalities laid down by the Government. Registering under Section 80G would be a good idea because, the Tax Benefits might help the NGO attract potential Donors.

Registration Under Section 80G:

If an NGO gets itself registered under section 80G then the person or the organisation making a donation to the NGO will get a deduction of 50% from his/its taxable income. The NGO has to apply in Form No. 10G As per Annexure-29 to the Commissioner of Income Tax for such registration.

A point to Note here is that, only 50% of the donation is exempt from Income Tax for the Donors for privately run NGO's. Only Government Chritable Foundations/Institutions are eligible for the 100% of the donated amount to qualify for Tax Exemption.

Documents the NGO has to Submit along with Form 10G:

The application form (10G) should be sent to the Commissioner of Income Tax alongwith the following documents:

1. Copy of income tax registration certificate.
2. Detail of activities since its inception or last three years whichever is lesser
3. Copies of audited accounts of the institution/NGO since its inception or last 3 years whichever is lesser.

Conditions the NGO has to Fulfill to Qualify under Section 80G:

For approval under section 80G the following conditions are to be fulfilled:

1. The NGO should not have any income which are not exempted, such as business income. 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.
2. The bylaws or objectives of the NGOs should not contain any provision for spending the income or assets of the NGO for purposes that are non-charitable.
3. The NGO must not work for the benefit of a particular religious community or caste.
4. The NGO maintains regular accounts of its receipts & expenditures.
5. The NGO is properly registered under the Societies Registration Act 1860 or under any law corresponding to that act or is registered under section 25 of the Companies Act 1956.

The whole point of Section 80G is to motivate citizens to donate to Charity to help the underprivileged people of our Country. So, the above rules and restrictions are laid down to ensure just that.