Section 80G The Income Tax Act allows tax deduction on donations made to eligible charitable organizations. Donations made in kind and above in cash 2,000 do not qualify for the tax break.
“all NGOs or charitable institutions do not automatically qualify for providing deduction under section 80G to their donors. Suresh Surana, founder of RSM India, said that only those organizations are approved by the Commissioner of Income Tax (Exemption) to receive donations and issue 80G certificates.
The list of eligible organizations is available on the Income Tax website. For taxpayers who donate through crowdfunding sites like Keto and Milap, the organizations’ qualifications are mentioned on the campaign page. “Persons raising funds for personal reasons or for family or friends are not eligible for 80G deduction. It is peer-to-peer crowdfunding where the recipient is an individual and in this case the donors do not get a tax break,” said Varun Sheth, Co-Founder and CEO, Keto.
However, these platforms do not take the responsibility of issuing 80G certificate or Form 10BE (starting from the current assessment year).
Beginning in the financial year 2021, charitable organizations will have to declare the details of all donations received in a year to the tax department through Form 10BD. Only after declaring the details of donation and issuing Form 10BE to the donors, the latter can avail tax deduction on donations. The due date for filing Form 10BD is 31st May of the next financial year. For example, the due date for the previous financial year 2020-21 was 31 May 2022.
“Form 10BE is now required for donors to avail the benefit of Section 80G deduction. Hence, if the didi fails to generate it on time or has wrong or no information about her donors, the donor will not be able to avail tax benefits,” said Manit Pal Singh, partner, IP Pasricha & Co.
According to Archit Gupta, Founder, Clear, the eligible deduction under 80G will be pre-filled in your Income Tax Return (ITR). In case the information is missing in the ITR form, you should approach the organization to check whether it has filed Form 10BD within the due date.
Some organizations allow a 50% or so total deduction without a qualifying limit, while others come with a qualifying limit of 10% of adjusted gross total income. This means that all donations made to institutions that fall in the latter category should not exceed 10% of adjusted gross total income.