The measures to avail of tax deduction on donations made to eligible charities and trusts have changed from the financial year 2022-23. This is different from how donors applied for tax deductions by just providing the donation receipt(s) from the recipient organization(s) as proof.
The changes in rules mandate the donor to provide Form 10BE that must be obtained from the donee organization before May 31 of that year. This rule was introduced to induce transparency regarding the claim of donations made to avail of the deduction benefit. Before this, the government had no way to check the truthfulness of the details submitted by the donor. The Central Board of Direct Taxes came out with a notification in March 2021 requiring the recipient organizations to file Form 10BD with details regarding the donations made by the donors.
The details that must be filled in Form 10 BD include:
- Statement Number
- Pre-acknowledgement number
- Donor’s ID
- Unique Identification Number (PAN/Aadhar Card/Passport/Driving License)
- Section codes– 80G, 35(1)(ii), 35(1) (iia), 35(1)(iii)
- Unique Registration Number and Date of Issue
- Name of the donor
- Address of the donor
- Donation type (corpus, specific, restricted grant or others)
- Mode of receipt
Once the Form 10BD is filled, a certificate in Form 10BE would be obtained in the Income Tax portal that must be shared with the donor(s) on or before May 31 following the financial year in which the donations have been made. In case of delay in filing the Form 10BD, a late fee of ₹200 per day is levied under Section 234G of the Act. However, the late fee must not be more than the amount donated for which there has been a delay in filing the form 10BD.
The institutions and funds that would now be compliant with the amendments include any research association, university, college or other institution or company or fund under Clause (viii) of sub-section (5) of section 80G and clause (i) to sub-section (1A) of section 35 of the Income Tax Act, 1961.
Introducing the new compliance rules regarding donations via Form 10BD/Form 10BE is an important step taken as the details of the donations can now be viewed in Form No. 26 AS and in compliance with the Income Tax portal, thus, ringing in more transparency.