Income Tax Exemption on Donations (NGO) under Section 80g

In this blog I will be writing about the Section 80g which presents the laws for tax exemptions on donations and fund spent on the NGOs. You will get the tax exemptions benefits when there is a donation for NGO’s. This law would encourage people to donate more fund for NGO’s and most of the companies run NGO’s to avail this benefit. This blog will explain the key points related to the donations and tax exemptions on that. If you have any questions on section 80g please post it in the comments section. Please subscribe to our future articles here.

• Income Tax Exemption and Rules on Gifts
• Tax Exemption for Donation Under Section 80G
• BUY: Income tax guide for the tax payer

Register Under Section 80g

The organization to be registered under the Section 80g.  If  the organization is registered under the Section 80g, the person or company making donations to such organizations are eligible to claim the Tax Exemption on the amount they donated. But, there is certain restrictions on how much can exempted from the whole donations are subject to the Income Tax rules under Section 80g. Please read the following sections to learn more about the details.

Conditions on Section 80g

There is few conditions to be fulfilled under the Section 80g.

• 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.
• The bylaws or objectives of the NGOs should not contain any provision for spending the income or assets of the NGO for purposes other than charitable.
• The NGO is not working for the benefit of particular religious community or caste.
• The NGO maintains regular accounts of its receipts & expenditures.
• 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.

Tax Exemption Limit on Donations

There is a limit on how much money can be exempted from the Income Tax.

• If the amount of deduction to a charitable organization or trust is more than 10% of the Gross Total Income computed under the Act (as reduced by income on which income-tax is not payable under any provision of this Act and by any amount in respect of which the assessee is entitled to a deduction under any other provision of this Chapter), then the amount in excess of 10% of Gross Total Income shall not qualify for deduction under section 80G.
•  The persons or organization who donate under section 80G gets 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 the donation made is allowed to be deducted from the taxable income and consequently tax is calculated.
• The ultimate benefit will depend on the tax rates applicable to the assessee. Let us take an illustration. Mr. X an individual and M/s. Y Pvt. Ltd., a Company both give donation of Rs. 1,00,000/- to a NGO called Satyakaam. The total income for the year 2003-2004 of both Mr. X and Ms. Y Pvt. Ltd. is Rs. 2,00,000/-. Now assuming that the rates are 30% for the individuals and 40% for the Companies without any minimum exemption limit.

Summary

• Income Tax Exemption and Rules on Gifts
• Tax Exemption for Donation Under Section 80G
• BUY: Income tax guide for the tax payer

Thank you for reading this article. I hope now you have good understanding on how to calculate the Tax Exemption on the donations. Don’t stop just reading the article. Please donate to such organizations and help the needies. If you need any help on finding the NGO’s in, please comment me, I can help out. Happy reading!!!!

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