Form 10BD of the Income Tax Act: Exploring Compliance
The income tax department approved the deduction under Section 80G of the Income Tax Act based on the assessee's claim or, at most, on a copy of the donation receipt that the assessee had provided. Before now, it was impossible to verify the accuracy of the gifts made. As a result, the trust that receives the donation must both give the donor a certificate of donation and submit an annual statement of donation to the Income Tax Department. This process bears some resemblance to the Income Tax Department's TDS Reconciliation system (TRACES). However, the CBDT has notified Form 10BD and Form 10BE through notification no. 19/2021 dated 26th March 2021, to promote more precision and transparency on the reconciliation of deductions claimed and donations received. In this article, we will provide a comprehensive overview of Form 10BD.
Table of content
Form 10BD of the Income Tax Act
Donation payments are subject to a deduction under Section 80G of the Income Tax Act of 1961. As a result, the Finance Act of 2021 made an addition requiring the trust with an 80G certificate to provide the authority with a Form 10BD statement of particulars of contribution within a certain amount of time each financial year. There will be severe consequences if the statement is not provided. This tax provision's primary goals are to increase openness and address the problem of erroneous or fraudulent deduction claims. Therefore, entities need to provide the required information to file Form 10BD. Rgese include:
Donor’s ID
Donor’s name
Donor’s address
Statement Number
Section code (Section 35(1)(iii), Section 35(1)(ii), Section 35(1)(iia))
PAN/Aadhaar card/Driving License/ Passport and another unique identification number
Donation type (specific, corpus, restricted grant or others)
Donation amount
Mode of receipt (Cash, cheque/draft, kind, and others)
Responsibilities of Donors and Recipients
Donors must carefully maintain accurate records of every transaction they have with eligible businesses. When contributing to a designated organisation, they must fill out Form 10BD with details regarding their gift or donation. Information that needs to be provided includes the recipient's details as well as the amount and intention of the donation.
Recipients are responsible for following Form 10BD as well. After receiving gifts or grants from contributors, they are expected to verify the information on the form. Recipients must ensure that the information they have been given is accurate and maintain their own records for future reference.
Applicability of Form 10BD
Form 10BD income tax forms are available for submission by any organisation that is classified as a charity institution, including trusts, colleges, schools, research institutions, universities, and others. It's also crucial to remember that these organisations' funding must go towards the following:
Section 35 (1A) (i)
Section 80G (5) (viii)
Form 10BD must be used by both contributions and recipients who transact with organisations eligible for special tax treatment or tax exemptions. This includes donations made to governmental bodies, legally recognised nonprofits, and other organisations that match the criteria outlined in the Income Tax Act. Donors who give cash or non-cash items to any of the following authorised organisations are required to utilise Form 10BD. However, if recipients accept grants or donations from these sources, they also need to follow Form 10BD. Comprehensive reporting is thus ensured, and any possible misappropriation of tax-exempt money is circumvented.
Form 10BD Due Date
It is required of all qualified trusts, organisations, and institutions to file the Form 10BD contribution return by May 31st of the financial year following the year in which they received the donation. An additional charge and a penalty will be applied if a donation return or statement of donation is not provided in the allotted period. Any delay is subject to a penalty fee of Rs 200 per day under Section 234AG of the Income Tax Act. Furthermore, in accordance with Section 271K of the Act, there is a minimum penalty of Rs 10,000 and a maximum penalty of Rs 1,000,000 for failing to provide the statement of donation in Form 10BD. The Assessing Officer is able to apply the specified fine amount to the institution.
Importance of Form 10BD Compliance
Form 10BD compliance entails more than merely abiding by the law. It encourages accountability, transparency, and trust in the tax system. Donors can profit from tax advantages on their charitable gifts, while beneficiaries can demonstrate compliance with the law, enhancing their credibility and reputation.
Consequences of non-filing of Form 10BD
The reporting company is required to file Form 10BD, and in accordance with the recently added Section 234G, failure to do so will result in a fine of Rs. 200/-per day of delay. The above-mentioned late fees cannot be greater than the gift amount for which a Form 10BD filing delay occurred. In addition to the late charge for submitting a statement of donation in Form 10BD, non-filing such a statement would result in a penalty under Section 271K, which can be as much as Rs. 1,00,000 in addition to a minimum of Rs. 10,000.
Process of Filing Form 10BD Online
The Income Tax Department's official website is the only way to electronically or digitally file Form 10BD under the new regulations. It's also crucial to remember that the reporting entity's income tax return must be signed by an authorised signatory. Below is a detailed how-to for submitting Form 10BD:
Go to https://www.incometax.gov.in/iec/foportal/, the official Income Tax website, and sign in with legitimate credentials.
Form 10BD can be found by selecting "Income Tax Forms" under the "e-file" option.
After choosing the necessary financial year, select "Continue."
When you select the "Provide details" tab, a new dashboard for filing Form 10BD will show up on your screen.
Fill out this form with accurate and necessary information. As you can see, there are three sections to this form. "Basic information," "Details about the donation and donors," and "Verification" are some examples of this.
The system automatically fills in the first section with basic data. You can click "Confirm" without entering any information.
Complete the second and third sections of this form with the relevant data.
Get an Excel template by downloading it to add the required fields. A CSV file will then start to download.
Once all the data has been entered, upload this CSV file to the portal. To retrieve the data supplied, this web form has an auto-save feature.
Select the "Verification" option to access all pertinent information.
Click "Proceed to verify" if all the information is correct after verifying.
Click "Yes" to download the acknowledgement and submit the form. Moreover, you can readily amend Form 10BD if there are any mistakes.
Following the submission of this Form 10BD, the nonprofit organisation must download Form 10BE, issue a Certification of Donation, and deliver it to the contributors. After that, they are eligible to deduct under Section 35 or Section 80G of the Income Tax Act.
How To Download Filed Form 10BD?
Here is a comprehensive, step-by-step guide to download the filed Form 10BD:
Select the e-file option from the Income Tax Department's official website.
Select "View filed forms" from the drop-down after clicking "Income Tax Forms".
A fresh webpage will show up. Select "Statement of Particulars to be filed".
Next, select "View all" by tapping on it.
Lastly, click "Download form" to get your electronically filed Form 10BD.
Conclusion
The Finance Act 2021's introduction of a new amendment has made Form 10BD a critical step towards increasing the openness of donation reporting systems. Charity organisations must understand all there is to know about Form 10BD income tax and how to file it online.
FAQ
Q1. Do I have to e-verify when I submit the Form 10BD?
Yes, as soon as you finish the e-verification process on your registered mobile number using DSC, EVC, or OTP, your form will be submitted.
Q2. Should a donation received in kind be reported in Form 10BD?
Yes, donations received in kind from donors must be reported on Form 10BD; donors are not permitted to deduct these payments under Section 80G. For in-kind donations, the givers' identities must also be provided on Form 10BD. However, as there is no basis for valuing donations received in kind specified in the Income-tax Act or Rules, this will provide a significant challenge for trusts. Nevertheless, they should be priced fairly and reasonably. Form 10BD reports the amount of in-kind donations received, as shown in the books of accounts.
Q3. Do you need to report every small donation in Form 10BD?
No matter how little or large the donation, it must always be recorded on Form 10BD. The government has not established a threshold amount for reporting donations. Therefore, all donations, regardless of size, must be listed on Form 10BD.
Q4. Should cash donations over Rs. 2,000 be reported in Form 10BD?
You should be informed that if the amount of the monetary donation exceeds Rs. 2,000, the deduction for the donor under section 80G is only allowed up to Rs. 2,000. Nevertheless, the real amount of cash gift received must be disclosed and should not be limited to Rs. 2,000 when reporting cash donations in Form 10BD if the amount of cash donation exceeds Rs. 2,000.
Q5. How should you report multiple donations from the same donor?
Every donation from a single contributor must be combined, and only the total of these donations must be recorded. The "Donation Type" and "Mode of Receipt" for each of these donations must, however, stay the same for the donations to be combined. If not, the data needs to be combined and reported according to the kind of donation and the method of receipt.
Q6. How should you report a joint donation (single donation from more than one person)?
When more than one person donates, the proportionate share from each donor must be disclosed. If the donors do not specify a share, it will be distributed evenly.
Q7. Should Form 10BD be filed if a trust has only provisional approval under section 80G?
Anyone who has been approved under section 80G or section 35 must file Form 10BD. Whether the organisation has regular or provisional approval is irrelevant. Therefore, it will be mandatory for an organisation that has received a donation and has been temporarily approved to file Form 10BD.
