Do you regularly donate money to charitable institutions or NGOs? You may already be aware of the tax benefits that come with such donations under Section 80G of the Income-tax Act, 1961. However, did you know that to avail of this deduction while filing an income tax return (ITR) from now on, you need a TDS-like certificate which has to be downloaded from the income tax department's e- filing portal by the donee institution or NGO to which you have made the donation?

PROOF TO BE FURNISHED TO CLAIM SECTION 80G DEDUCTION

As per the amended (vide Finance Act 2020) provisions of Section 80G, the donation certificate (downloaded from the income tax portal by donee institution or NGO) serves as proof that the money donated by you has been received by the NGO and is eligible for the deduction under Section 80G. In the past (till FY 2020-21), donors could claim deductions based on donation receipts issued by the institutions alone and such a donation certificate was not required.

With advancements in technology, the Income-tax department has standardized the process to ensure that donations received by charitable institutions are matched one-to-one with the deductions claimed by taxpayers. Thus, the charitable institution or NGO receiving the donation must file a statement of all donations received by it in a financial year to the Income-tax department from FY 2021-22 onwards and issue separate certificates to the donors, who can claim the deduction only based on this certificate.

REQUIREMENT TO FILE STATEMENT OF DONATIONS

The donee institution or NGO approved by the Principal Commissioner or Commissioner of Income Tax must file a statement of donation in Form 10BD electronically on the income tax department's e-filing portal. Form 10BD can be filed electronically either through Electronic Verification Code (EVC) or a digital signature. The statement of donation in Form 10BD must be filed on or before May 31 of the financial year immediately following the year in which the donation was received.

Here is an example to understand this. Let's say an NGO received a donation of Rs 50,000 from a donor on September 1, 2022. The financial year in which this donation was received is FY 2022-23. The statement of donation in Form 10BD for this donation must be filed with the income tax department on or before May 31, 2023, which is the deadline for filing the statement for the financial year immediately following FY 2022-23. Further, when a taxpayer files ITR for FY 2022-23, then the details in the donation certificate need to be keyed in while filing ITR.

The donation certificates to be issued to the donors have to be downloaded by the donee institution from the income tax portal after filing the Form 10BD statement. The certificates are generated by the portal only after Form 10BD is filed. Therefore, in essence, these donation certificates (just like TDS certificates) are generated via the income tax department's e-filing portal and issued to the donors.

Thus, a taxpayer is required to ask for a donation certificate from a donee institution or NGO to be able to claim a deduction under Section 80G while filing ITR.

DETAILS TO BE SUBMITTED BY THE DONOR

To enable filing of the above-mentioned statements of donations by the donee institutions with the donor's details, the donor, i.e., must furnish name, address, and identity proof to the donee institution. A copy of PAN and Aadhaar is preferable, but the following identity proof numbers are acceptable in Form 10BD:
(a) Permanent Account Number (PAN)
(b) Aadhaar Number
(c) Tax Identification Number
(d) Passport Number
(e) Elector's photo identity number
(f) Driving License Number
(g) Ration card Number

Additionally, the donor must provide information regarding the purpose of the donation, which can be a corpus, specific grant, or others. It is essential to note that merely giving donations and having a certificate of donations does not automatically make a person eligible to claim the deduction. The donor must claim the deduction in the income tax return, and the donation must be a sum of money. Donations made in kind are not eligible for deduction under section 80G. Deductions can only be claimed for donations made in cash, cheque, or electronic modes. However, cash donations exceeding Rs 2,000 are not eligible for deduction.

ISSUANCE OF CERTIFICATE OF DONATIONS

After the filing of the statement of donations, the donee institution must furnish a certificate of donation in Form 10BE to the donor, specifying the amount of donation received during the year. This certificate serves as evidence to substantiate the deduction claimed under section 80G. The certificate of donation in Form 10BE must be issued (after downloading from the income tax portal) on or before May 31 of the financial year immediately following the year in which the donation was received.

It is worth noting that the due date for filing the statement of donations in Form 10BD and issuing the certificate of donations in Form 10BE is the same, i.e., May 31. Therefore, it is crucial for the donee institution to submit Form 10BD well in advance to allow time for generating Form 10BE and sending it to the respective donors.

A CERTIFICATE OF DONATION SHOULD BE GENERATED FROM THE E-FILING PORTAL

After an organization uploads Form 10BD, it can retrieve the donation certificate in Form 10BE from the income-tax e-filing portal. This certificate of donation in Form 10BE is generated for each donor individually. The organization must send Form 10BE to each respective donor, either by email or another appropriate method. Note that Form 10BE is considered furnished only when it is sent to the donors.

These forms must be downloaded from the e-filing portal and cannot be created manually and issued to the donors, as the downloaded forms are the only valid ones. The Form 10BE generated from the portal includes the unique Donation Reference Number (ARN) , as well as details about the donee, donor, and donation. This Donation Reference Number (ARN) is also required to be mentioned by the donor in 'Schedule 80G' in the ITR form while claiming a deduction under Section 80G.

CONSEQUENCES OF NON-COMPLIANCE

Failure to file the statement in Form 10BD or to issue the certificate of donation to the donor in Form 10BE can lead to consequences for the donee institution. A fee under Section 234G is charged, with the amount being Rs 200 per day, during which the default continues, with the maximum amount not exceeding the amount in respect of which failure has occurred. The fee must be paid before filing the statement of donation or before furnishing the certificate of donation.

Moreover, a penalty under Section 271K is levied if any institution, research association, or fund fails to furnish a statement of donation in Form 10BD or fails to issue a donation certificate to the donee in Form 10BE. The penalty may be Rs 10,000, which can be increased to Rs 100,000.

CONCLUSION

Therefore, to claim a deduction under Section 80G, obtaining the donation certificate mentioned above from the charitable institution or NGO to which the donation has been made is mandatory. It is important to ensure that the donee institution furnishes the statement of donation in Form 10BD and issues the certificate of donation in Form 10BE generated from the e-filing portal in a timely manner to avoid any fees or penalties. The Form 10BE certificate will help in the hassle-free deduction claim to the donor under section 80G.