The Income-tax Act allows deduction in respect of donations made for charitable purposes. Contributions made to certain relief funds and charitable institutions can be claimed as a deduction under Section 80G of the Act.
The Finance Bill 2020 proposes following amendments to section 80G.
(a) Principal Commissioner shall be the authority to grant registration
As per existing provisions, the institutions seeking registration under section 80G shall make an application in Form 10G with the commissioner in accordance with the Rule 11AA. The Finance Bill 2020 proposes that application for approval under section 80G shall be made to Principal Commissioner or Commissioner. The Principal Commissioner has also been proposed to be added as an authority to grant registration under this section.
(b) Obligation to file statement of donation
The Finance Bill 2020 proposes that deduction under this section to a donor shall be allowed only if a statement is furnished by the donee in respect of donations received and in the event of failure to do so, fee and penalty shall be levied. Hence, a new reporting obligation has been imposed on the institutions receiving donation. Further, these institutions shall be required to issue a certificate to the donor and the claim for deduction to the donor may be allowed on that basis only.
(c) Timelines to make application
The Finance Bill 2020 prescribes the timelines by which the institutions seeking registration under Section 80G shall make an application to the Principal Commissioner or Commissioner for grant of approval under this section. It has also been proposed that the entities prescribed in the below table are required to make fresh application for registration under this section by the specified date. Further, the provisions related to validity of registration, time-limit to pass an order by tax authorities and date of applicability of approval are proposed in the Finance Bill. These have been explained in below table:
S.
No. |
Type of
Entity |
Date to make
application for
registration |
Validity of
registration |
Time limit
to pass
order |
Applicability
of approval |
1. |
Institution registered before amendment proposed by the Finance Bill, 2020 comes into force |
Within 3 months from the date on which this provision comes into force i.e. by 31st August 2020 |
Approval shall be granted for a period of 5 years |
Before expiry of 3 months from the end of the month in which the application is made. |
From the assessment Year from which approval was granted earlier to such institution. |
2. |
Institutions
whose registration expires In future |
At least 6 months prior to expiry of registration. |
Approval shall be granted for a period of 5 years after satisfying about the genuine- ness of activities. |
Before expiry of 6 m 0 n t h s from the end of the month in which the application is made. |
From the assessment year immediately following the financial year In which such application Is made. |
3. |
Institutions
g r a n ted
provisional
registration |
At least 6 months prior to expiry of the period of the provisional approval or within 6 months of commencement of its activities, which- ever is earlier. |
Approval shall be granted for a period of 5 years after satisfying about the genuine- ness of activities. |
Before expiry of 6 m o n t h s from the end of the month in which the application is made. |
From the assessment year immediately following the financial year in which such application is made. |
4. |
In any other case |
At least 1 month prior to commencement of the previous year relevant to the assessment year from which the approval is sought. |
Approval shall be granted provisionally for a period 3 years from the assessment year from which the registration is sought. |
Before expiry of 1 month from the end of the month in which the application is made. |
From the first day of the assessment year for which such institution was provisionally approved. |
All applications, pending before the Commissioner on which no order has been passed before the date on which the new provisions comes into force, shall be deemed to be applications made in the last category (‘In any other case’) on that date.
(d) Concept of perpetual registration withdrawn
Before 01-10-2009, there was a requirement that before the expiry of the date as mentioned in the section 80G approval, renewal had to be sought for. However, the Finance Act, 2009 made a change in this regard. After such change, only those institutions were required renewal whose expiry is due before 01-10-2009. For the remaining cases, the perpetuity of approval has been provided until the commissioner withdraws the exemption. Therefore, there is no need for periodical renewal of the registration under present law.
The Finance Bill, 2020 proposes to reintroduce the concept of limited validity of registration under section 80G. Now the entities shall be granted registration only for a period not exceeding five years at a time.
(e) Grant of Provisional Registration
The charitable entities are granted registration on the basis of documents or information furnished before the CIT (Exemptions). The registration is granted once the commissioner is satisfied about the genuineness of the activities of such institution. The Finance Bill 2020 proposes that provisional registration for three years shall be granted to new charity institution which is yet to start its charitable activities. |
