As the second wave of the pandemic ravages the country, social media websites are flooded with donation requests from people in need. These requests are generally raised through crowdfunding platforms, where like-minded people come together to raise funds for a cause.
If you are donating through such platforms, you should know that you may get some tax break for helping the needy, as per Section 80G of the Income Tax Act. However, you can’t claim deduction against every donation made and not every organisation is qualified to issue a certificate to you under Section 80G.
Here is what you need to know in case you plan to claim tax deduction against the donations made.
Compulsory registration: A charitable institution has to be registered with the tax department to issue an 80G certificate which is required for claiming tax deduction. You may claim 50-100% deductions on the donation made in case the charitable institution is registered.
“Crowdfunding allows many registered and unregistered non-profit organisations to carry out fundraising activities. If you are donating through a crowdfunding platform, you should check if the organisation you are donating to has a valid 80G certification. Donate only to these specified institutions,” said Archit Gupta, Founder and CEO – Cleartax. It is possible for the taxpayer to verify if the charitable institution is registered or not. “Every crowdfunding organization provides the details of eligibility of claiming 80G deduction at the time of receiving a donation. Besides this, the donor can also validate the institutions approved under 80G on the tax portal,” said Sudhakar Sethuraman, Partner, Deloitte India.
Donee needs to file Form 10BD: The charitable institution which is receiving donations on behalf of people have to file Form 10BD to give out the details of the people who have made donations. This will help the tax department give information prefilled to the taxpayers. “Budget 2020 brought in the change to claim deduction under Section 80G whereby the donee would need to file Form 10BD that is a statement of donations to the government listing the various donors, their PAN, value of donation etc. This would allow the tax authorities to pre-fill the donors tax return with deduction under Section 80G. The taxpayer would continue to receive the certificate for donation made in Form 10BE,” said Sethuraman.
Verify pre-filled details: The tax department will give the information prefilled to the taxpayers but it is important to verify such information before you submit your ITR. You can verify the same with the receipt issued by the institution. “It would be good to verify details such as the amount of donation, details of the organization and eligibility criteria of the donation made (whether qualified for 50% or 100% claim) before proceeding to file tax return,” said Sethuraman. You should also verify through the receipt, your name, address, PAN of the trust. The registration number of the trust issued by the Income Tax department must be printed on the receipt. The number is issued with validity and needs to be renewed on expiry. Hence, the receipt should also mention the validity period.
Do remember that donations in kind such as food, clothes etc., are not eligible for deduction under Section 80G.
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