New Amendments to the Income Tax Act 1961 for Charities: Key

Forms 10BD and 10BE for tax exemption under 80G expiring May 31, 2022.

In accordance with the implementation of the amendment to the Income-tax Act, 1961 from FY21-22, the procedure for obtaining tax exemption under section 80G on grants given to NGOs has changed.

Dhabal Udani, founder and CEO-Danamojo said, “Previously, donors only had to provide receipts from NGOs as evidence. However, since FY22, the burden of consent has shifted to the NGO which has to file a grant statement in the form of 10BD by May 31 of each financial year.

He added, “In order for NGOs to download from the income tax portal, they need to provide the donor in the form of an integrated grant receipt in Form 10BE.”

Impact for ordinary people

Ordinary people do not usually pay taxes. Experts say tax benefits are a hygienic cause and not the primary motivation to give. And once they do, they want to save their taxes. Many times due to lack of amount, forget, receipt is lost, donation is forgotten etc.

Udani noted, “With the new amendment, the common man will now be able to claim all the tax benefits of his grant. And so it can motivate them to give more. ”

Impact for NGOs

NGOs will now have the additional task of consenting and filing before May 31 which will impose an additional burden on them with their already limited resources. Therefore, “they may focus more on institutional or CSR payers or individuals with higher net worth. They may decide to exclude individual grants বিশেষ especially small-tickets to reduce compliance overhead,” Udani said.

“Therefore, it is very possible that small and medium-sized NGOs could avoid taking direct donations from the leading individuals. Even if they consider retail grants or retail strategies, they may be able to obtain grants from other intermediaries such as GiveIndia, Charity Aid Foundation (CAF), etc., thus avoiding the difficult and resource-intensive task of filing. Huge statement, “he added.

Advice for the government

However, NGOs will have to bear the cost of an extra effort and compliance in this regard. Industry experts say the government could take further steps to reduce these efforts and increase donations to the country as they tighten the process now and stop any tax losses. E.g.

1. Eliminate donor address requirements: Since the new statement will require a PAN number for all donations, donor addresses will be available through PAN. “The need to capture the donor’s address again only adds to the reporting burden, and another point of friction for the donor,” Udani noted.

2. Provide 100 per cent tax exemption for 80G grants: With all this clarity, Udani added, “Exemption has been claimed with most frauds but no donations have been made, it will be eliminated. The government should therefore give 100 percent tax exemption for charitable donations, as it does for other investments and insurance. “

Overall effect

Overall, experts say there will be greater transparency in the granting system and this will result in tax breaks. This will ensure that people are not donating, but demanding a waiver, it will be removed thus reducing the tax loss of the government to that extent and it will give a true picture of 80G subsidy in our country.