The Finance Minister of India, Ms. Nirmala Sitaraman presented the Union Budget on 1st February, 2020 in which new provisions for charitable institutions or trusts have been introduced. In this article, we will share the details of the amendments and the compliance to be followed by the charitable institutions for claiming of deductions under Section 80G by the donors. The provisions stated below are proposed to be made with effect from 1st June, 2020.
What is the deduction under Section 80G?
As per Section 80G of the Income Tax Act, 1961, deductions are available in full or partly for making donations to certain notified funds, charitable institutions or other institutions/funds set up by the Government of India. This means that all donations do not fall under this section. Only those donations which are prescribed or notified by the government are allowed as deductions. This deduction can be claimed by any taxpayer whether to be individual, company, firm or any other person, resident or non-resident.
Eligibility for claiming Deduction under Section 80G
Finance Bill 2020 on claiming deduction under Section 80G
All the trusts/charitable institutions shall be required to file an application before Commissioner or Principal Commissioner to take registration as per new provisions introduced by the Finance Bill 2020 within the time specified below:
Also, all the trusts/charitable institutions shall file a statement of receipts of donations to the prescribed income-tax authority within the prescribed time specifying all the details of the number of donations received, date of donation, the donor’s name, PAN number, and such other details as may be prescribed.
Further, all charitable trusts and organizations shall furnish to the donor a certificate containing the amount of donation, date of donation, registration and PAN number of the trust or institution and such other details as may be prescribed.
The most important effect of this provision is that the donor shall be provided deduction under Section 80G directly in return of Income only on the basis of the filing of such prescribed statements by such trusts/charitable institutions.
Earlier for claiming the deductions for donations made under Section 80G the donor has to submit the details of the donation made and the details of the trust/charitable institution as provided in the stamped receipt issued by the trust or such institution. But now the government has introduced above such provisions to improve the reliability of the deductions claimed and to prevent the fake deductions claimed by the taxpayers.