Introduction
This guide explains the importance of Forms 10BD and 10BE for NGOs and donors in allowing tax deductions under section 80G. It covers mandatory requirements, the necessity of filing these forms, and the consequences of non-compliance, highlighting key aspects of income tax compliance and the nuances of reporting.
Background
To ensure transparency and accuracy in reporting donations, the Indian government introduced Forms 10BD and 10BE by introducing rule 18AB. These forms play a pivotal role in verifying the authenticity of deductions claimed under Section 80G by taxpayers. Through such rules, the Income Tax Department aims to promote accountability and integrity in the tax system, particularly concerning charitable contributions.
Key Aspects and related questions addressed:
1. Brief understanding of the law:
1.2 What is Form 10BE
Form 10BE refers to the certificate of donation issued by the NGO to the donors to facilitate donors to claim 80G deduction. After filing the statement of donations in Form 10BD, NGOs have to download the certificate in Form 10BE and provide the same to donors.
A sample copy of Form 10BE can be seen here.
1.3 Why is it necessary for an NGO to file Form 10BD and furnish Form 10BE?
It is a mandatory requirement under Section 80G of the Income Tax Act, 1961. Failure to do so will attract penalties on NGOs covered in Question 5.4.
1.4 Why is Form 10BE crucial for the donor?
The NGO’s failure to file form 10BD and furnish form 10BE to the donor may lead to the denial of tax benefits to the donors.
2. Reporting Requirements:
2.1 What are the mandatory details required to be obtained from the donor for reporting in Form 10BD?
The name and full address of the donor is required along with the following:
Name of the donor
Full address of the donor
Permanent Account Number (‘PAN’) OR Aadhar Number
[If the above details are not available, then the following can be alternatively obtained
Taxpayer Identification number (‘TIN’) of the country where the person resides
Passport number
Elector’s photo identity number
Driving license number
Ration card number]
Additionally, the type of donation must be specified in the form. The available options are:
Corpus
Specific Grant
Others.
It is recommended to obtain the donation type information from donors as a best practice.
2.2 Could a donation be reported in Form 10BD even if some required donor details are not available?
If Form 10BD is submitted without the prescribed donor details, it will generate a validation error indicating that the required information is missing. As a result, reporting donations without complete donor information in Form 10BD may not be possible as of now.
For donations not being reported in Form 10BD, a reconciliation is suggested to be maintained as the details are required to be further reported in the Audit report. (refer point no. 11 for further clarity).
2.3 Is it mandatory to report all donations/grant received by NGO in Form 10BD?
Form 10BD is a statement of donations received by an NGO. It includes a column for providing the Tax Identification Number, which is typically required for donations from foreign sources. Therefore, any donation or grant received by an organization, whether domestic or foreign, should be reported in Form 10BD if the prescribed identification details are available.
Although the primary intent of the law appears to cover donations and grants eligible for the 80G benefit, the form also includes a column for donations in kind. However, donations in kind are not eligible for the 80G benefit, which creates a discrepancy that needs to be addressed by the Central Board of Direct Taxes (CBDT).
2.4 What are the different types of income earned by NGO that require reporting in Form 10BD?
There are 3 income categories that are available for reporting namely the following:
Corpus: Funds where specific declaration is available that it is towards corpus.
Specific Grants: Donations that are given to fund specific purposes and projects and where utilization reports are to be given.
Others: Donations received without a specific purpose (i.e. general donations) and without the need of it being tracked falls under this category.
The reporting of these classifications needs to be in alignment with the disclosures made in the financial statements as well as in the ITR of the NGO.
2.5 Should donations be reported based on when they are paid by the donor or on an accrual basis?
Section 80G(2)(a) of the Income Tax Act specifies "the sum paid." Therefore, donations should be reported in Form 10BD based on when they are actually paid by the donor. However, if a cheque is deposited but not cleared by March 31st, it may still be reported. For further clarification on CSR grants, please refer to Questions 4.1 and Question 4.2 below.
2.6 Whether donation received in kind is required to be reported in Form 10BD?
Form 10BD also requires reporting of donations received in-kind from donors even though no deduction under section 80G is allowed to donors in case of such donation in kind.
The identity of donors (Name, Address, PAN/Aadhaar/alternative permitted detail) is also required to be furnished in Form 10BD for donations received in-kind.
3. Reconciliation:
3.1 Are the details reported in Form 10BD required to be reconciled with any other disclosure in the Audit report?
The details reported in Form 10BD are required to be reconciled with disclosures made in Audit report (Form 10B/Form 10BB based on applicability).
Following is the screenshot of the disclosure requirement in Audit Report Form -10BB.
The disclosure requirement in Audit form 10B is more elaborative. Here is the link to the form - Form 10B. Section no. 21, 22, 23 of Form 10B deals with the disclosure requirement.
3.2 Are the details reported in Form 10BD required to be reconciled with any other disclosure in the Income Tax Return?
The details reported in Form 10BD should match with the disclosure made in Schedule VC - Voluntary Contribution of Form ITR 7. The said schedule requires the detailed breakup of the income earned by NGO with specified categories (corpus/specific grants, etc.) which is also required to be reported in Form 10BD.
4. CSR Grants:
Disclosure in case of Corporate Social Responsibility (‘CSR’) grants.
In case of CSR grant arrangements, considering the laws and regulations, there are instances where NGOs receive funds, but may have to return it if unutilized, either during the same Financial year or next financial year depending upon the arrangement with the donor and the type of the agreement entered into (Single-year/Ongoing). For a detailed article on this refer here.
We have addressed some of the questions that come up for reporting in form 10BD with the help of the following case study:
Case study of CSR grants and the disclosure requirement in Form 10BD
CSR Donor: XYZ Limited
Implementing Agency/NGO: ABC Foundation
Grant period (single year project): April 23 - Mar’24
Grant disbursed in FY 23-24 : INR 1 crore
Unutilized as on 31 March 2024 : INR 10 lacs
4.1 If the unutilized funds of INR 10 lacs are returned in the same FY 23-24, what shall be the disclosure in Form 10BD?
In case of returning the unutilized funds of INR 10 lacs in the same FY 23-24, the disclosure in form 10BD would be of INR 90 lacs (i.e. net receipt).
4.2 If the unspent funds of INR 10 lacs are returned in April 24 (ie FY 24-25), what shall be the disclosure in Form 10BD?
In the scenario where INR 10 lakhs of unutilized funds are returned in April 2024, the disclosure in Form 10BD would depend upon the interpretation adopted by the NGO given below:
View 1:
According to Rule 18AB(3) of the Income Tax Rules,1962, the form should reflect INR 1 crores, representing total donations made in FY 2023-24.
View 2:
Alternatively, Explanation 2A to Section 80G of the Income tax, 1961, suggests that the form serves as the basis for deduction. Thus, declaring INR 1 crores might allow claiming exemptions for the full amount, even if only INR 90 lacs was donated relevant for FY 2023-24.
Furthermore, if the unspent funds are subsequently transferred to Schedule VII Fund, a second deduction might be claimed under Section 80G.While View 2 offers a nuanced approach, a cautious strategy could involve initially filing for INR 2 crores and promptly submitting a correction statement for INR 1.90 crores to ensure compliance with disclosure requirements.
Please note the answers to the above questions would remain the same if the project is ongoing. For a detailed article on treatment of unspent CSR funds refer here.
5. Compliance Deadlines:
5.1 What is the due date for filling the statement in Form 10BD?
The last date to submit the statement in Form 10BD is 31st May immediately following the end of the financial year in which the donation was received.
For example, for financial year (‘FY’) 2023-24, the due date for filing form 10BD is 31st May 2024.
5.2 Can Form 10BD be filed on a daily / monthly basis before the prescribed due date?
Yes, Form 10BD can be filed on a daily or monthly basis. The Income Tax Act does not explicitly restrict the frequency of filing, as long as the form is submitted before the prescribed due date.
5.3 What is the due date for issuing a certificate in Form 10BE?
The last date to issue a certificate to the donor in Form 10BE is 31st May immediately following the end of the financial year in which the donation was received. Issuing a certificate would mean that it be sent to the donor within the said timeline.
For example, for financial year (‘FY’) 2023-24, the due date for issuing the Form 10BE certificate is 31st May 2024.
It is suggested to file Form 10BD well in advance before the due date as generating Form 10BE may take 2-3 working days.
5.4 What are the consequences of non-filing of Form 10BD?
Non-filling of Form 10BD will attract a fee of Rs.200/- per day of delay under section 234G of the Income Tax Act. 1961.
Please note the late fee shall not exceed the donation amount in respect of which delay has occurred in filing form 10BD.
Apart from the fee for delay in furnishing the statement of donations in Form 10BD, the Assessing officer may impose a penalty u/s 271K towards failure to file such a statement. The penalty u/s 271K, shall not be less than Rs.10,000/- and which may extend up to Rs.1,00,000.
Currently, section 273B does not provide any relief from this penalty, even if the NGO can demonstrate a reasonable cause for the failure to file Form 10BD.
Moreover, the donor will not be entitled to tax benefits under section 80G of the Income Tax Act, 1961.
6. Other critical points:
6.1 If no donation/grant is received, then is the Nil Form 10BD return still required to be submitted?
If no donation/grant is received during the financial year, then form 10BD is not required to be filed.
6.2 Can an organization file Multiple Form 10BD?
Under the Income Tax Rules there is no specific provision barring multiple filing of Form 10BD. The notes mentioned in the Form 10BD issued by the income tax department online form 10BD makes it clear that Form 10BD is allowed to be filed multiple times for the same financial year.
6.3 Can we revise Form 10BD and is there any specific timeline?
Form 10BD can be revised in case any unintentional errors were made in the form.
There is no explicit restriction on frequency of revision as on current date. The Income tax portal allows us to file the revision for FY 21-22 and onwards.
Please note at the time of filing original Form 10BD, pre-acknowledgement number is generated. While filing the revised Form 10BD the same pre-acknowledgment number should be mentioned.
6.4 Whether recurring donations or multiple tranches of grant should be clubbed under single entry or upload the data for multiple receipts?
All the donations received during the year from a particular donor of the same nature (Corpus/Specific Grant/Others) and received through the same mode (Cash/Kind/ Electronic modes/Others) should be clubbed together and reported as a single entry at the end of the year.
6.5 Is Form 10BE considered equivalent to an 80G receipt?
According to Explanation 2A of section 80G of the Income Tax Act, 1961, the donor can claim a deduction under section 80G only based on the Form 10BE certificate. Hence, Form 10BE can be regarded as equivalent to an 80G receipt. Moreover, NGOs may issue a payment receipt to the donors for acknowledgement purposes at the time of receiving the donation.
6.6 What is the filing procedure for Form 10BD?
A detailed manual with step-by-step procedure is provided by the Income Tax department here.
7. Automation of Form 10BD and Form 10BE
7.1 Is there any software that can automate the Form 10BD and Form 10BE reports?
While multiple software's are available to automate receipting, we've created one over the years.
ERP4Impact.com a leading financial management platform created ground up for NGOs in India. ERP4Impact can be used to:
secure your donor database
auto-generate and send the receipts,
analyse your trends with interactive dashboards,
generate Form 10BD and
send out all Form 10BEs seamlessly. Book your DEMO here today.
Conclusion:
Understanding and addressing key questions surrounding Forms 10BD and 10BE is essential for NGOs and donors to navigate tax compliance effectively. By comprehending reporting requirements, reconciling financial details, and meeting compliance deadlines, organizations can uphold transparency. Further, using automation tools streamline processes. In essence, staying informed empowers NGOs to foster trust, transparency, and social impact.
PS: Our editorial team will also give its views on one generic, commonly faced legal query sent by the readers. Click here to submit your query
What if Form 10BD is filed 100 days late and accordingly Form 10BE is downloaded after 3 days and issued to Donor on 103rd day. Will Fees u/s 234G be levied for 100 days for late 10BD (+) again Rs. 200 per day for 103 days for late issue of Form 10BE? In other words, will the fees u/s 234G be Rs. 400 per day?
This article has removed my various doubts and the same is considered as a well clarified article for better understanding.