Approval of Trust Under Section 80G Of the Income Tax Act. Means It is necessary for a charitable trust to get itself registered under section 12A. Such benefits will, however, accrue only to the trust and not to the donors. Following are the approvals a trust may seek so as to give ample reward to the donors in respect of the donations made to the trust. Even existing trusts have to periodically seek continuation of the approval.
If the trust is willing to give some benefit to its donors, then the trust should seek and obtain approval under section 80G (5).
As per Section 80 G of the Income Tax Act, donations paid or given to any institution or fund established in India for a charitable purpose is eligible for deduction (normally 50%) in the hands of the donor subject to the following conditions:
(i) The income of the institution is exempt under section 11 or 10(23) or (23AA) or (23C) of the Act.
(ii) The funds of the institution are applied only for charitable purposes.
iii. The institution should not be for the benefit of any particular religious community or caste.
(iv) The institution maintains regular accounts of its receipts and expenditure.
(v) The institution shall be approved by the Commissioner of Income Tax.
Main points in this respect are:
(i) Section 80G applies to donations toy institution or fund, only if it is established in India for a charitable purpose and if it fulfils the stipulated conditions.
(ii) Following conditions are required to be fulfilled under section 80G(5)-
(a) the instrument under which the institution or fund is constituted does not, or the rules governing the institution or fund do not, contain any provision for the transfer for application at any time of the whole or any part of the income or assets of the institution or fund for any purposes other than charitable purposes;
(b) the institution or fund in not expressed to be for the benefits of any particular religious community or caste;
(c) the institution or fund maintains regular accounts of its receipts and expenditure;
(d) the institution or fund is either constituted as a public charitable trust or is registered under the Societies Registration Act, 1860, or under any law corresponding to that Act, in force in any part of India or under section 25 of the Companies Act, 1956, or is a University established by law, or is any other educational institution recognized by the Government or by a University established by law, or affiliated to any University established by law or it is an institution financed wholly or in part by the Government or a local authority, and
(e) in relation to donations made after the 3Pt day of March 1992, the institution or fund is for the time being approved by the Commissioner in accordance with rule 11 AA.
(iii) The application should be made in Form No.1 0G, prescribed under rule 11 AA and it is required to be submitted to the jurisdictional Commissioner of Income-tax.
(iv) The trust is necessarily required to be registered with the Commissioner under section 12A. Airust can apply for registration under section 12A and simultaneously seek approval under Section 80G(5).
(v) There is a time-limit of 6 months (from the date on which such application was made), within which the Commissioner shall pass an order either granting the approval or rejecting the application. However, any time taken by the applicant in not complying with the directions of the Commissioner is excluded.
(vi) The period of validity of approval is specified in the order of approval, which cannot exceed five assessment years. Before the expiry of this period, the trust should seek continuance of the approval, by submitting the application in Form No. lOG again.
(vii) The approval u/s. 80 G is issued in writing after the Commissioner is satisfied about the genuineness of the activities of the trust and about fulfilment of all conditions laid down in section 80 G (5)(i) to(v).
Deduction to A Trust U/s 35AC
Section 35AC of the Income-tax Act permits deduction of whole of the amount of donation to a trust or fund or institution approved by the National Committee for carrying out any eligible project or scheme. Such deduction is allowed on furnishing of a certificate for such payment in the prescribed Form No. 58A under rule 11(1) of Income-tax Rules. Such deduction shall not be allowed under any other section of the Income Tax Act, to avoid double deduction.
Application for approval of eligible projects have to be made in duplicate to the Secretary to the National Committee for Promotion of Social and Economic Welfare, Department of Revenue, Government of India, North Block, New Delhi 110001.
Eligible Projects or Schemes:
The projects or schemes prescribed by Rule 11 K relate to the provisions of one or more of the following:
(a) construction and maintenance of drinking water projects in rural areas and in urban slums including installation of pump sets, digging of wells, tube-wells and laying of pipes for supply of drinking water;
(b) construction of dwelling units for the economically weaker sections;
(c) construction of school buildings primarily for children belonging to the economically weaker sections of the society; source of energy systems;
(e) construction and maintenance of bridges, public highways and other roads;
(f) any other programme for uplift of the rural poor or the urban slum- dwellers, as the National Committee may consider fit for support;
(g) promotion of sports;
(h) pollution control;
(i) establishment and running of educational institutions in rural areas, exclusively for women and children upto 12 years of age;
(j) establishment and running of hospitals and medical facilities in rural areas, exclusively for women and children upto 12 years of age;
(k) establishment and running of creches and schools for the children of workers employed in factories or at building sites;
(L) encouraging the production of bacteria induced fertilizers;
(m) any programme that promotes road safety, prevention of accidents and traffic awareness;
(n) construction of hostel accommodation for women or handicapped individuals or individuals who are of the age of sixty-five years or more;
(o) establishment and running of institutions for vocational education and training in rural areas or towns which consist of population of less than five lakhs.
The National Committee has to satisfy itself that the benefit shall flow to the public in general or to the individuals belonging to economically weaker sections of the society and that the applicant has the necessary expertise, personnel and other facilities and shall maintain separate accounts in respect of the eligible project or scheme. Requirements of Rules 11J, 11K and 11L have to be fulfilled. Procedure has been prescribed in rule ii M of the Rules. Such deduction is allowed under section 80GGA of the Income Tax Act. And at 100 % of the donation irrespective of income.