Income Tax News: Understanding the intricacies of tax exemption rules is essential for individuals keen on contributing to charitable, religious, or NGO institutions under Income Tax Act 80G. This article breaks down the crucial details, emphasizing the importance of proper documentation and specific regulations to ensure a seamless process for claiming tax benefits.
Navigating Tax Exemption Rules
When contributing to charitable, religious, or NGO institutions, individuals can avail tax exemption under Income Tax Act 80G. However, adherence to specific rules and procedures is vital for a successful claim.
Importance of Certificate of Receipt
To benefit from tax exemption, taxpayers must upload the certificate of receipt of donation issued by the respective institution while filing their income tax return. Without this essential documentation, tax exemption will not be granted.
Categories of Institutions and Exemption Limits
Income Tax rules outline different categories of institutions, allowing for 50 to 100 percent tax exemption based on the type of organization. It is crucial to understand these categories and their respective exemption limits.
Mandatory Form 10BE Certificate
Both charitable and religious institutions, along with NGOs, are obligated to report donations received throughout the financial year to the Income Tax Department. Simultaneously, individuals making donations must issue a Form 10BE certificate. This certificate serves as proof of tax exemption when filing income tax returns.
Mediums of Donation and Exemption Limits
Taxpayers can claim exemption for donations made in cash, check, or online. However, it’s important to note that cash donations exceeding Rs 2,000 are not eligible for exemption. The Income Tax Department only allows exemption for check or online payments.
Preference for the Old Tax Regime
Tax exemption on donation amounts can only be claimed under the old tax regime. Thus, individuals must opt for this system at the beginning of the financial year to avail the deduction, as it is not available in the new tax system.
Filing Form 10BE Electronically
Form 10BE can be filed electronically through Electronic Verification Code (EVC) or digital signature. Essential details, including the donor’s name, address, PAN number, Aadhaar number, and the institution’s registration number, must be provided. The form should be filed on or before May 31 of the financial year in which the donation is made.
100 and 50 Percent Tax Exemption
The Income Tax Department categorizes trusts and institutions to determine whether they qualify for 100 or 50 percent tax exemption. Contributions to religious or charitable institutions allow for a 50 percent tax exemption, while government or charitable institutions notified by the government for social work grant a 100 percent tax exemption. Understanding these categorizations is crucial for maximizing tax benefits through charitable donations.
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