Under the new guidelines, donors will be eligible for the tax benefit only if the NGO or charity they have donated to has filed Form 10BD before the stipulated deadline. It is to be noted that the benefits can only be availed by people falling under the old tax regime.
The Centre government has recently amended the rules regarding tax benefits on charitable donations under Section 80G of the Income Tax (I-T) Act. The move has been implemented to ensure greater transparency while giving donations to charity and crack down on bogus tax claims.
What do the new rules say?
Under the latest rules, all non-governmental organisations (NGOs) and charitable trusts need to file Form 10BD for the donations they receive during the financial year. The trust will also have to provide a certificate (Form 10BE) to the donor.
The rules come into effect from assessment year 22-23 (FY20-21). NGOs and trusts have until 31 May to file Form 10BD.
How can you get maximum benefits under the amendment?
Under the new guidelines, donors will be eligible for the tax benefit only if the NGO or charity they have donated to has filed Form 10BD before the stipulated deadline. The donee then has to issue Form 10BE to the donor.
If the donee fails to generate the application in time or has incorrect or no information about its donors, donors will not be able to avail any tax benefit. The organisation will also be fined Rs 200 per day under the I-T Act if they fail to comply with the rules.
It is to be noted that the benefits can only be availed by people falling under the old tax regime.
What are the implications of the rules?
The amendment puts the onus of compliance on the NGOs or trusts. Under the previous rules, NGOs only had to ensure that a valid 80G certificate and donation receipt was issued to the individual.
Now, they need to issue Form 10BE to the donor after they have submitted a record of their donations to the I-T department. The responsibility of an individual’s tax benefits on charitable donations will be dependent on whether the trust has filed the required form on time.
It also ensures that officials will be able to weed out bogus tax claims by matching the Form 10 BD from the trusts to certificates issued to the donors.