Impact of Budget 2020 on Charitable Organisations

Impact of Budget 2020 on Charitable Organisations

This article discusses the contents of the Finance Bill of 2020 as well as the Union Budget of 2020 about their impact on charitable institutions as well as charitable trusts. Proposals for significant changes have been included in the contents of the Finance Bill and Budget of 2020, such as the renewal of 80G registration and 12AA registration, issuance of a certificate for every donor, generation of donor wise donation statement per quarter and many more changes. The changes that have been proposed are stated as follows: 

Section 10(23C):

Under section 10(23C) section, it has been recommended that every approved trust, fund, university, institution, hospital, and other medical institutions, educational institutions have to be specified. And need to make a fresh application to have their grant be approved before or by the 31st of August, 2020. The grant, if and when approved, will be approved for five years only. After the application has been made, the Income Tax Department has to approve it by passing an order within three months from the date of application. A fresh application has to be submitted by all assessee for approval of grant after every five years.

Section 11, 12AA and 12AB:

All registered institutions and trusts need to submit a new application for approval of grant before or by the 31st of August 2020. The grant will stay approved for 5 years only, after which another application must be submitted for approval of the grant. After a registered institution has applied for grant approval, the Income Tax Department has a time of three months from the date of application for passing the order for approval of the grant. An institution or trust that has the approval under both the sections, that is, section 12AA as well as section 10(23C), is eligible to apply for registration. The institutions and trusts that apply to be registered under section 12AB will be granted registration of provisional nature for a time period of 3 years. Institutions or trusts with provisional registration will need to submit a new application for registration under the same section at least six months before the provisional registration expires or within six months from the commencement of the activities of the institution, depending on whichever happens earlier. Section 12AB will replace section 12AA from the 1st of June, 2020, and this section will deal with the registration process provisions from the 1st of June, 2020.

Section 80G:

For the approval of the grant, every trust and institution registered under this section has to submit a new application by or before the 31st of August, 2020. The grant, if approved, shall stay approved for 5 years only after which another new application for grant approval must be submitted. Order must be passed by the Income Tax Department for grant approval within three months from the date of submission of the application. Institutions and trusts are submitting applications for registration under the section above; that is, section 80G will be given a provisional registration for a while three years. An application for renewing the registration has to be submitted either six months before the registration expires or within a time of six months from the day of commencement of the activities of the institution or trust, whichever is earlier. A statement must be furnished by every trust and institution registered under this section as per the guidelines provided, which should include details of the donors along with further information about donation received by the institution or trust. Following this, the trustor institution shall give a certificate to the donor, which shall include the details of the donation. 

Section 80GGA:

The maximum amount that can be donated in cash has been reduced from Rs.10,000 to Rs.2,000. Deduction under this section to the donor will be permitted based on the statement received by the income tax department from the payee from time to time.