New provisions of section 80G approval for claiming tax benefit to donor

Introduction: Donation paid to fund or institution as referred in section  80G (2) (a)(iv) allowed as deduction u/s 80G to the donor  subject  certain limits of deductions & conditions attached thereto and this tax incentive motivate people  to donate to those NGO having approval. As a result thereof such NGO can do charitable activity smoothly as compared to other NGO not having 80G approval. Now it is important to understand how to get 80G approval by the charitable NGO and the compliances to be made by such NGO so that tax benefit available to the donor. Recently income tax law has been changes drastically on this matters and  government has introduced a new system of procedure for section 80G approval as well as filing of statement containing details of donation received and issuance of downloaded certificates against donation received to avail deduction from gross total income and saving of tax. This article has made effort for the understanding of new provisions pertaining to all such matters.

Conditions to be satisfied by fund or institutions  for 80G approval [section 80G(5)]

if fund or institution is established in India for a charitable purpose and if it fulfils the following conditions, namely :—

1. where the institution or fund derives any income, such income would not be liable to inclusion in its total income under the provisions of sections 11 or  section10(23AA) or (23C)
2. the instrument creating institution or fund or the rules governing the institution or fund do not, contain any provision for the transfer or application at any time of the whole or any part of the income or assets of the institution or fund for any purpose other than a charitable purpose;
3. the institution or fund is not expressed to be for the benefit of any particular religious community or caste;
4. maintains regular accounts of its receipts and expenditure;
5. the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860 , or under any law corresponding to that Act in force in any part of India or under section 25 of the Companies Act, 1956 (now section 8 company), or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law,  or is an institution financed wholly or in part by the Government or a local authority;
6. For donations made after the 31st day of March, 1992, the institution or fund is for the time being approved by the Commissioner in accordance with the rules* made in this behalf; and
7. …clause (vii) omitted.

[(viii) and (ix) shall be inserted after clause (vii) by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021.

1. deliver statement in form 10DB and verified in such manner and setting forth such particulars and within such time as may be prescribed
2. institution or fund furnishes to the donor, a certificate specifying the amount of donation in such manner, containing such particulars and within such time from the date of receipt of donation, as may be prescribed:

 Process involved for approval of fund or institution u/s 80G(5):

Application for approval : Provided that the institution or fund referred to in clause (vi) shall make an application in the prescribed form 10A( electronically on income tax portal) and manner to the Principal Commissioner or Commissioner, for grant of approval.

Time limit for making application for approval under new system:

1. where the institution or fund is approved under clause (vi) (as it stood immediately before its amendment by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020), within 3 months from the 1st day of April, 2021. i.e upto 30^th June 2021;

note: this period has been extended to 31-08-2021 vide circular  no 12/2021 dated 25-06-2021

1. where the institution or fund is approved and the period of such approval is due to expire, at least 6 months prior to expiry of the said period;
2. where the institution or fund has been provisionally approved, at least 6 months prior to expiry of the period of the provisional approval or within 6 months of commencement of its activities, whichever is earlier;
3. in any other case, at least 1 month prior to commencement of the previous year relevant to the assessment year from which the said approval is sought:

[1^st proviso to section 80G(5)(ix)]

 Order of approval or cancellation [2^nd proviso to section 80G(5)(ix)]

Provided further that the Principal Commissioner or Commissioner, on receipt of an application  in form 10A  made under the first proviso, shall,—

(i)  Where the application is made under clause (i) of the said proviso, pass an order in writing granting it approval for a period of 5 years in form 10AC;

(ii)  Where the application is made under clause (ii) or clause (iii) of the said proviso,—

(a) Call for such documents or information from it or make such inquiries as he thinks necessary in order to satisfy himself about—

(A)   Genuineness of activities of such institution or fund; and

(B)   Fulfilment of all the conditions laid down in clauses (i) to (v);

(b)  after satisfying himself about the genuineness of activities under item (A), and the fulfilment of all the conditions under item (B), of sub-clause (a),—

(A)   Pass an order in writing granting it approval for a period of 5 years; or

(B)   If he is not so satisfied, pass an order in writing rejecting such application and also cancelling its approval after affording it a reasonable opportunity of being heard;

(iii)  Where the application is made under clause (iv) of the said proviso, pass an order in writing granting it approval provisionally for a period of 3 years from the AY from which the registration is sought, and send a copy of such order to the institution or fund:

Effective date of approval. [4^th proviso to section 80G(5)(ix)]

 Provided also that the approval granted under the second proviso shall apply to an institution or fund, where the application is made under—

(a)   clause (i) of the first proviso, from the assessment year from which approval was earlier granted to such institution or fund;

(b)   clause (iii) of the first proviso, from the first of the assessment years for which such institution or fund was provisionally approved;

(c)   in any other case, from the assessment year immediately following the financial year in which such application is made.

Time limit for passing order [3^rd proviso to section 80G(5)(ix)]

Provided also  that the order under clause (i), sub-clause (b) of clause (ii ) and clause (iii) of the first proviso shall be passed in such form and manner as may be prescribed, before expiry of the period of 3 months, 6 months and 1month, respectively, calculated from the end of the month in which the application was received.

 Summery chart of New system of approval- section 80G(5)(ix)

Transitional provisions-  pending application for approval but on order till 31-03-2021

 Following sub-section (5E) shall be inserted after sub-section (5D) of section 80G by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021:

section 80G (5E) All applications, pending before the Commissioner on which no order has been passed under clause (vi) of sub-section (5) before the date on which this sub-section has come into force, shall be deemed to be applications made under clause (iv) of the first proviso to sub-section (5) on that date.

Note: no need to file another application again, if earlier application made upto 31-03-2021 is pending for disposal.

New provisions in section 80G for filing of statement of donations and certificates to be issued for donation received

Following clauses (viii) shall be inserted after clause (vii) of sub-section (5) of section 80G by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, w.e.f. 1-4-2021

 Newly inserted section 80G(5)(viii):

 Original statement:

the institution or fund prepares such statement for such period as may be prescribed and deliver or cause to be delivered to the prescribed income-tax authority or the person authorised by such authority such statement in such form( form 10DB) and verified in such manner and setting forth such particulars and within such time as may be prescribed:

 Correction statement:

Provided  that the institution or fund may also deliver to the said prescribed authority, (a) correction statement for rectification of any mistake or to add, delete or update the information furnished in the statement delivered under this sub-section in such form and verified in such manner as may be prescribed;

 Summary of prescribed rule 18AB for filing of statement of donation & issuance of certificate of donations.

Note: applicable from FY 2021-22 and last date 31^st May of next FY.

Mandatory id proof /address proof and details required of the donor:  Any of the following id details must be required for filing the form 10BD , besides, name and address of donor:

 Classification of donation: Corpus, specific grants, others.

Mode of receipts: cash, kind, electronic mode, others

Consequences of delay in filing of statement or issue of certificate:

 Fee for default relating to statement or certificate.

234G. (1) without prejudice to the provisions of this Act, where,—

(a)   the research association, university, college or other institution referred to in clause (ii) or clause (iii) or the company referred to in clause (iia) of sub-section (1) of section 35 fails to deliver or cause to be delivered a statement within the time prescribed under clause (i), or furnish a certificate prescribed under clause (ii) of sub-section (1A) of that section; or

(b)   the institution or fund fails to deliver or cause to be delivered a statement within the time prescribed under clause (viii) of sub-section (5) of section 80G, or furnish a certificate prescribed under clause (ix) of the said sub-section,

it shall be liable to pay, by way of fee, a sum of ₹200/- for every day during which the failure continues.

Maximum limit of late fee:  

 (2) The amount of fee referred to in sub-section (1) shall,—

(a)   not exceed the amount in respect of which the failure referred to therein has occurred;

• be paid before delivering or causing to be delivered the statement or before furnishing the certificate referred to in sub-section (1).