Income Tax benefits available to Ganpati Mandals:
Festive season is on and so it would be great to analyse the income tax benefits available to Ganpati Mandals:
A. Section 11 – Exemption of Income from Property Held for Charitable or Religious Purposes
1. Applicability:
Ganpati Mandals can avail tax exemption on income if they are constituted as a trust, society, or charitable institution and are engaged in religious or charitable purposes.
The income applied towards charitable or religious purposes within India is exempt from tax under Section 11.
If the mandal or temple receives anonymous donations (donations without the donor’s identity), these can be taxed at 30%, except when such donations are exclusively for religious purposes.
2. Conditions:
At least 85% of the income must be applied for religious or charitable purposes during the year.
If the mandal fails to apply the full 85%, the shortfall must be spent within the next year or applied for exemption under Section 11(2) by submitting Form 10.
Income that is not applied within the specified time and not accumulated or invested according to the provisions will lose its tax-exempt status.
3. Accumulation of Income:
If the mandal wishes to accumulate the income for future use (up to a maximum of 5 years), it must file Form 10 and specify the purpose of accumulation. The accumulated income should be invested or deposited in prescribed modes (like government securities or bonds).
B. Section 12 – Eligibility for Exemption:
1. Section 12 treats the income of charitable and religious trusts registered under 12AB as exempt.
2. Ganpati Mandals must register under Section 12AB to claim exemption. Failure to register can lead to taxation of the entire income of the mandal.
3. 12AB registration needs to be renewed every five years.
C. Section 80G – Deduction for Donations to Mandals:
1. Donations made to Ganpati Mandals that have obtained Sec 80G certification are eligible for deduction in the hands of the donor.
2. The donor can claim a deduction of 50% of the donation amount. However, the deduction is capped at 10% of the donor’s adjusted gross total income.
3. A very important criteria is that the donation is not expressed to be for the benefit of any particular religious community or caste
4. The mandal must maintain proper records and issue receipts to donors in the prescribed format. These receipts must contain the 80G registration number and details about the donation.
5. Mandals must renew their 80G registration periodically, similar to Section 12AB registration.
D. Audit Requirements:
1. Mandals whose income (before claiming exemption) exceeds the maximum amount not chargeable to tax (currently Rs. 2.5 lakh) must undergo a statutory audit.
2. The audit report is filed in Form 10B, and it must be submitted before the due date of filing the income tax return.
3. Non-compliance with audit requirements can lead to the mandal losing its tax-exempt status for that year.
E. Conclusion:
Failure to comply with any of these regulations can lead to a loss of tax exemptions and penalties from the Income Tax Department. Hence, regular financial oversight and professional assistance are highly recommended for Ganpati Mandals.
