Until the financial year 2020-21, individuals were able to claim deductions for donations by providing donation receipts when filing their income tax returns. However, starting from the financial year 2021-22, individuals can only claim the deduction if they enter the details of the donation certificate in the income tax return form. Without the certificate, individuals will not be eligible to claim the Section 80G deduction.
Evidence required to support the claim for a deduction under Section 80G Under the amended provisions of Section 80G, a donation certificate obtained from the income tax portal by the recipient institution or NGO (donee) is now considered as evidence that the donated funds have been received by the organization and are eligible for the Section 80G deduction. Prior to the amendment (up until the financial year 2020-21), donors could claim deductions based solely on the donation receipts issued by the institutions, without the need for a donation certificate.
Donee Institution to file Statement of Donations with Income Tax Department
The approved donee institution or NGO, as authorized by the Principal Commissioner or Commissioner of Income Tax, is required to electronically file a statement of donations in Form 10BD on the e-filing portal of the income tax department. The filing of Form 10BD can be done electronically using either an Electronic Verification Code (EVC) or a digital signature (DSC) or a one time password (OTP). This statement of donation in Form 10BD must be submitted on or before May 31 of the financial year immediately following the year in which such donation was received.
After filing the Form 10BD statement, the donee institution or NGO must obtain the donation certificates by downloading them from the income tax portal. The certificates are generated by the portal only once the Form 10BD has been filed.
Consequently, individuals seeking to claim deductions under Section 80G must obtain the donation certificate from the relevant donee institution or NGO. These certificates act as evidence of the donation and are essential to claim such deduction while filing their income tax return.
Details Required by Form 10BD
In order to file Form 10BD, i.e. statement of donations, donors are required to provide the donee organization with: donor's name, address and identity proof. A copy of PAN Card and Aadhaar card is most preferred in this case.
Furthermore, the donor is required to specify the purpose of the donation, which can be categorized as a corpus, specific grant, or other purposes. It is important to understand that simply making a donation and possessing a donation certificate does not automatically entitle an individual to claim the deduction. The donor must actively claim the deduction in their income tax return, and the donation must be in the form of a monetary sum. Donations made in kind are not valid to be claimed as deduction under Section 80G.
As per Income Tax Act, 1961, only donations made through cash, cheque, or electronic modes are eligible for deductions. However, it's important to note that cash donations exceeding Rs 2,000 are not eligible for deduction under Section 80G.
Issuing Form 10BE - Certificate of Donations
After submitting the statement of donations in Form 10BD, the donee institution is required to provide the donor with a certificate of donation in Form 10BE. This certificate will state the amount of donation received throughout the year and serves as proof to support the deduction claimed under section 80G. The certificate of donation in Form 10BE must be issued to the donor by downloading it from the income tax portal, on or before May 31 of the financial year following the one in which such donation received.
As can be concluded from above information, both the filing deadline for the statement of donations in Form 10BD and the issuance deadline for the certificate of donations in Form 10BE is May 31. Hence, it is essential for the donee institution to submit Form 10BD sufficiently early to allow for the generation of Form 10BE and its timely delivery to the respective donors.
The Form 10BE forms must be obtained by downloading them from the e-filing portal and cannot be manually created or issued to donors. The downloaded forms are the only recognized and valid ones. The Form 10BE generated from the portal contains essential information, such as the unique Donation Reference Number (ARN) and details regarding the donee, donor, and donation. When claiming a deduction under Section 80G, the donor must include this Donation Reference Number (ARN) in 'Schedule 80G' of the income tax return (ITR) form.
Results of Non - Compliance with such regulations
If the donee institution fails to file the statement in Form 10BD or issue the certificate of donation to the donor in Form 10BE, it can face certain consequences. Under Section 234G, a fee is imposed, amounting to ₹ 200 per day for each day of non-compliance, with a maximum limit not exceeding the amount related to the failure. The fee must be paid prior to filing the statement of donation or providing the certificate of donation.
In addition, if an institution, research association, or fund fails to furnish a statement of donation in Form 10BD or neglects to issue a donation certificate to the donee in Form 10BE, they may face a penalty as per Section 271K. Initially, the penalty can be ₹ 10,000, but it has the potential to be raised to ₹ 100,000.
Writer Credits: This article has been professionally by Yashika Chandra, who is currently pursuing a Chartered Accountancy (CA) course; along with editorial expertise from Lawmen to Laymen. Together, we bring you a well-crafted and insightful piece on Form 10BD and 10BE required for claiming deduction under Section 80G of Income Tax Act.
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