NGO Registration Process under Section 80G of the Income Tax Act 1961

Non-Governmental Organizations (NGOs) play a crucial role in societal welfare by addressing various social, economic, and environmental issues. To encourage philanthropy and support such organizations, the Income Tax Act of 1961 provides provisions under Section 80G for tax benefits to donors contributing to registered NGOs.

The process of registering an NGO under Section 80G involves several steps to ensure compliance and eligibility for tax benefits. Here’s a comprehensive guide to understanding this registration process:

Eligibility Criteria

For an NGO to be eligible for Section 80G registration, it must fulfil certain criteria:

• Legal Structure: The NGO must be constituted as a Trust, Society, or a Section 8 Company (under the Companies Act, 2013).
• Registration: It should hold valid registration under the relevant laws, such as the Trusts Act, Societies Registration Act, or the Companies Act.
• Compliance: The organization must maintain proper accounts, adhere to auditing requirements, and follow prescribed compliance norms.

80 G Registration procedure consists of following steps:

• Application Preparation: The NGO needs to prepare an application in Form 10G and submit it to the Income Tax Department i.e., Commissioner of Income Tax (Exemption) in the jurisdictional area of the institution.
• Documentation: Supporting documents like the organization’s registration certificate, audited financial statements, and details of the activities undertaken must be submitted.

To apply for 80G registration, the following documents are mandatory along with Form:

• Self-certified copy of the organisation’s incorporation document.
• Self-certified copy of the registration certificate issued by the relevant authority.
• Self-certified copy of the registration under the Foreign Contribution Regulation Act (FCRA), if applicable.
• Self-certified copy of the existing order granting approval under clause (23C) of section 10.
• Copies of annual accounts for up to three years preceding the application for existing entities.
• If business income is included in the organisation’s income, copies of annual accounts and audit reports as per Section 44AB for the three years prior to the application.
• Details of the organisation’s operations since its inception or the last three years, whichever is shorter.

Verification and Scrutiny:

The scrutiny and verification process for obtaining registration under Section 80G of the Income Tax Act involves several steps conducted by the Income Tax Department to ensure the genuineness and compliance of the organization. Here’s a detailed procedure:

• Application Review: Once the organization submits Form 10G (application for registration under Section 80G), the Income Tax Department initiates the process by reviewing the application and accompanying documents. This includes scrutinizing the details provided regarding the organization’s activities, finances, objectives, and compliance with eligibility criteria.
• Document Verification: The department verifies the submitted documents, which typically include audited financial statements, details of activities conducted, registration certificate, PAN card, and other relevant documents. These documents are assessed to confirm the authenticity and accuracy of the information provided.
• On-Site Inspection/Inquiry: In certain cases, the department may conduct an on-site inspection or inquiry to physically verify the existence and functioning of the organization. This involves visiting the premises and evaluating the activities and infrastructure to ensure they align with the information furnished in the application.
• Evaluation of Activities: The Income Tax Department assesses the activities carried out by the organization to ascertain whether they fall within the purview of charitable purposes as defined under Section 80G. The activities must align with the prescribed guidelines to qualify for tax exemption.
• Financial Compliance Check: The department scrutinizes the financial records to ensure proper accounting practices, transparency in financial transactions, and adherence to regulatory guidelines. This includes examining the utilization of funds and donations received by the organization.
• Communication and Queries: During the verification process, the department may communicate with the organization, seeking clarifications or additional information regarding the activities, financials, or any discrepancies found during the scrutiny.
• Compliance with Regulations: The organization is expected to comply with various regulations and maintain proper records of donations received, expenditures incurred, and activities conducted. Proper bookkeeping and maintenance of transparent financial records are crucial throughout this process.

Approval and Issuance: Upon satisfying the requirements, the Income Tax Department grants Section 80G registration. It issues a certificate valid for a specified period.

Applications for registration under Section 80G can also be rejected. The rejection can occur due to various reasons, including:

Reasons for rejection:

• Non-Compliance: If the organization does not meet the eligibility criteria or fails to comply with the requirements specified under Section 80G, the application can be rejected. This might include discrepancies in the provided information, failure to meet prescribed standards for charitable activities, or non-compliance with financial reporting norms.
• Insufficient Documentation: Inadequate or incomplete submission of required documents can lead to rejection. This includes missing or inaccurate financial statements, incomplete details of activities carried out, or failure to provide essential supporting documents as per the application guidelines.
• Inconsistencies or Inaccuracies: Any inconsistencies or discrepancies found during the scrutiny process, whether related to financial records, activities claimed, or information provided in the application, can lead to rejection. Accuracy and transparency are crucial, and discrepancies can raise doubts about the genuineness of the organization.
• Failure to Respond to Queries: If the organization fails to respond satisfactorily to queries or requests for additional information from the Income Tax Department during the verification process, it might result in the rejection of the application.
• Non-Compliance with Regulations: Any failure to adhere to the prescribed regulations, including maintaining proper records, utilizing funds as per guidelines, or non-compliance with statutory norms, can lead to rejection.
• Invalid Activities: If the activities conducted by the organization do not fall within the defined scope of charitable purposes as per Section 80G, the application might be rejected.

However, even if the application is rejected, the Organizations can mitigate the issues that led to the rejection and reapply after addressing the concerns highlighted by the Income Tax Department. It’s crucial for organizations to understand the reasons behind the rejection and take corrective actions to meet the necessary criteria before reapplying.

Importance of 80G Registration

• Tax Benefits for Donors: Registered NGOs can offer tax benefits to individuals and corporates, encouraging more contributions toward social causes.
• Credibility and Trust: It enhances the credibility of the NGO, fostering trust among potential donors and stakeholders.
• Increased Funding: Availability of tax benefits often leads to increased funding, enabling NGOs to expand their impact.

Conclusion

Obtaining Section 80G registration is a significant milestone for an NGO. It not only encourages philanthropy by offering tax incentives to donors but also validates the organization’s commitment to transparency and compliance.

By simplifying the process and providing clarity on the importance of this registration, NGOs can attract more support and effectively channel it toward their noble causes, fostering positive change in society.

Author : Vartika Yadav