A donor of a Charitable Trust, Society, NGO, Section 25 Company or other charitable entity is entitled to get tax benefit of deduction from his income on account of the donation made by him. The amount of deduction is prescribed in section 80G(2)(iv). The conditions which must be satisfied contains in before the donation to the trust or institution becomes tax deductible in the hands of a donor Section 80G(5) of Income Tax Act. These conditions are as under :-
(i) Income of the Trust would not be includible in Total Income
The income of the trust etc. would not be includible in total income by virtue of provisions contained in sections 11 and 12, section 10(23), section 10(23AA) or section 10(23C);
(ii) The Income of the Trust is applicable wholly for Charitable Purpose
The income of the trust etc., as per rules governing the trust etc., is applicable wholly for charitable purpose. The charitable purpose does not include religious purpose. However, section 80G(5B) permits application upto 5% of the income of a year towards religious purposes.
(iii) Trust is not for the benefit of particular religion
The trust etc. is not expressed for the benefit of any particular religious community or caste;
(iv) Trust must maintain regular books of accounts for its receipts and expenditure
It maintains regular books of account regarding its receipts and expenditure; and
(v) Approval of Trust, Society, NGO, Section 25 Company
The trust etc. is approved by the Commissioner of Income Tax (CIT)/DIT (Exemptions) in this behalf.
Thus, the approval to a charitable trust etc. is granted in pursuance of condition No. (v), mentioned above.
As per Rule 11 AA an application for approval u/s 80G shall be made in triplicate in Form No. 10G. It shall be accompanied by copies of following documents : -
(i) order of registration u/s 12A, notification u/s 10(23) or notification u/s 10 (23C);
(ii) note on activities conducted since inception or in last three years, whichever is less; and
(iii) accounts of the institution since inception or last three years, whichever is less.
Disposal of application for approval u/s 80G(5)
As per the Rule the application in form No. 10G shall be disposed of within six months of the date of its receipt by the Commissioner of Income Tax (CIT)/DIT (Exemptions). However, the time taken by the assessee in complying with any requirement shall be excluded while calculating the aforesaid limitation period. Thus, limitation is involved in disposal of such an application. No formal procedure has been laid down either in the Act or the Rule for disposal of the applications. However, if it is intended to reject an application, the trust etc., has a right to an opportunity of being heard. The time taken by the trust etc. in complying with the directions of the CIT/DIT(E) regarding filing of evidence or information shall be excluded in computation of aforesaid time limit of six months. The CIT/DIT(E) may grant approval for a period upto five years. While doing so, he has to specify the assessment years for which approval is valid. Thus, it is clear that a trust etc. may need repeated approvals. It may be stated here that the Act or the Rules do not distinguish between an initial or subsequent approval.
What is approval u/s 80G(5)? Is it necessary for a charitable Institution? How to apply for it? What is the use of approval u/s 80G(5) for Charitable Trust, Charitable Society, Non Governmental Organizations (NGO), Section 25 Companies and other exempted institutions?