Disqualification from Exemption
Even after registration and meeting all requirements under the Income Tax Act, here are a few situations which may still disentitle a donor from claiming the tax deduction.
- If a charitable organisation registered as NGO is engaged in religious affairs or promoting interests of a particular caste of community.
- If this registration process for NGO has any ‘non exempted income’, that is if they have any business income or a commercial purpose that gives rise to incomes not specifically exempted for NGOs.
- If the donor pays in cash – the government from the budget 2018-19 onwards has reduced the admissible deduction, if cash has been used from 10,000 rupees to only 2,000 rupees. However, there is no such limit for cheque or other electronic modes of transfer.
- If the NGO does not maintain its routine account of expenditures and receipts.
- If the NGO is not duly registered under the Societies Registration Act of 1860 or under Section 8 company registration Act, 201
To summarise, registering under the 12AA section allows the NGO exemption from tax rates. Failing to do will make them applicable for ITR filling. The 80G section, on the other hand, ensures that a person donating to the NGO can deduct the amount from their taxable income, which leads to more donations.