Income tax filing | Missing Form 10BE: Why donors are forgoing tax deduction benefits

Unless you receive From 10BE from the charitable trust or NGO, you wouldn’t be able to claim the deduction for donation in your tax returns.

What started as an exercise to reduce hassles in claiming tax deductions for donations and avoiding fake claims has ended up as a nightmare for donors.

Purshottam Yedge, 37, a professor based in Pune, had to let go of tax deduction benefits worth Rs 8,800 for donations made to various temple trusts and an education based non-governmental organisation, despite his chartered accountant following up for a specific certificate to claim these donations.

Up until Assessment Year 2022-23 (for income earned or donations made in financial year 2021-22), Yedge had to merely share the organisation name, its Permanent Account Number (PAN) and the sum donated to claim the 50 percent tax deduction (100 percent for select organisations) against his taxable income under Section 80 G. Now, donors have to follow a two-step process; step #1: Collect a donation receipt at the time of donation; step #2: After the financial year ends, get a donation certificate or Form 10BE to claim tax benefit in income tax returns.

This Section 80G tax deduction isn’t available to those who have opted for the new tax regime.

Hassles at the NGO level

After the Government announced that donation details would be prefilled in tax returns in 2020, just as with tax deduction at source details, there were procedures to be followed by the charitable trusts and NGOs.

After a whole process of freshly registering these organisations in financial year 2021-22, the Government aimed to weed out fake donation claims or unaccounted money conversion frauds.

Since A.Y. 2022-23, after a taxpayer donates money, the trusts and NGOs need to submit a Form 10BD to the Government before May 31 each year, with all the details of the donors, including PAN, the amount donated, and date of approval.

It needs to be noted here that most NGOs don’t have an organised backend and software systems to handle this compliance burden. “Organisations aren’t going to fill this form with the donor’s details until they have a substantial number of records, so it would typically happen closer to the May 31 deadline (instead of at more regular intervals),” says chartered accountant Mehul Sheth.

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In the interim, donors forget about the donations, and some even lose the receipts. If the organisation has an online process of sending receipts and accepting donations, then you can still reach out and collect Form 10 BE from them before filing tax returns.

“We submitted the details of all donors, who asked us for a donation certificate to claim under income tax returns. Not all want to claim it under the tax returns. After submitting the details to the tax department, we had to wait for 24 hours to generate Form 10 BE for all donors,” says Neha Vaidya, who runs a non-governmental organization to feed the homeless. She was in the process of sharing the Form 10 BE via email to donors individually, even as the Government asked all NGOs to re-register for a second time in less than three years.

Unless you receive this Form 10BE from the charitable trust or NGO, you won’t be able to claim the deduction in your tax returns. “An ARN number is required by the donor to claim the donation in tax returns. This is found in Form 10BE. But many organisations do not generate this at the time of donation. Neither do all temples or religious organisations collect your email address to send the Form 10BE over to you later, when they submit the details to the Government and generate the form,” says Karan Batra, founder of CharteredClub.com. Physical copies, even if possible, could be a costly and time-consuming affair, and thereby quite impractical.

Another donor, Savita Gokhale, says she will be able to claim the tax deduction benefits on her donation worth Rs 20,000, as she can call the organisation and procure the Form 10BE. “Since the amount was slightly on the higher side, I tried to source the form. For other smaller donations, I have given up. Getting in touch with those temples located far away is not feasible with my working hours,” says Gokhale, who works with an advertising agency.

Smaller donations of Rs 500-2,000 require too much effort on the taxpayer’s end and they would rather forgo the benefits than put themselves through such torture, says Batra. “Moreover, the data on donations has not been prefilled in returns as the systems are being updated and the efficiency to match the details requires time,” he adds.

On a brighter note, the number of fake donation claims has substantially reduced after the change.

“The change has ensured that people who aren’t donating but are claiming exemptions are sifted, thereby reducing the tax loss of the Government and presenting a true picture of Section 80 G donations in the country,” says Dhaval Udani, CEO-DanaMojo (a payments provider). Select NGOs have been using the payment solutions platforms such as Udani’s, which track donations and offer Form 10BE to donors, thereby reducing the compliance burden on the NGOs.

If your NGO or charitable trust doesn’t offer this certificate, get in touch with the organisation through email or call and request Form 10BE. "As Chartered accountants, we won’t enter the donation details without the ARN No. as it could lead to a mismatch of data in the income tax returns. We would want to avoid any query of any kind from the income tax department,” says Paras Savla, partner at KPB & Associates.

The next time you donate, ensure that you submit your correct email address, so that the organisation has a way to get in touch with you for Form 10BE.

Also read | What is Form 16? Here's what you need to know about this key ITR filing document

Moneycontrol's take

While weeding out fake donations is important, 12-14 months is a fairly long time to track donations and trust your memory. But a system where the Form 10BE’s are emailed within a specific time would be appropriate.

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“If NGOs and charitable trusts are offered either a quarterly or half yearly deadline to submit Form 10 BD (information submission by NGOs), just like with TDS and TCS returns, then the same would save last-minute hassles for taxpayers looking to claim the donations. Since the deadline for Form BD is May 31, we need to offer at least a month for the data to be processed and this leads to the returns filing window shortening,” Savla adds.