TaxTMI 
TaxTMI 
Modernising Charitable Tax Incentives : Clause 354(1) of Income Tax Bill, 2025 Vs. Section 80G(5) of Income Tax Act, 1961
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.... to claim tax deductions. Section 80G(5) of the Income-tax Act, 1961, is the existing statutory provision that governs similar approvals, laying down specific conditions for charitable institutions or funds to be eligible for donations to be deductible in the hands of the donor. Over the decades, Section 80G has been amended multiple times to address administrative challenges, prevent abuse, and align with evolving policy objectives. A careful analysis of Clause 354(1) vis-`a-vis Section 80G(5) is crucial to understanding the continuity, departures, and likely implications for stakeholders in the charitable sector and for tax administration. 2. Objective and Purpose Legislative Intent and Policy Considerations The core objective of both C....
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.... Principal Commissioner or Commissioner, subject to fulfilment of conditions (i) to (ix). * Applications for approval, renewal, or provisional approval are to be made in prescribed forms and within specified timelines. Analysis: Both provisions require a formal application process and approval by a senior tax authority. However, Clause 354(1) provides a more granular and time-bound framework for different scenarios (e.g., commencement of activities, provisional approval, renewal), which is set out in detail in sub-sections (2)/(4) and the accompanying table. This is a significant improvement over the sometimes ambiguous timelines under the previous regime. 3.2. Charitable Purpose and Exclusion of Sectarian Benefit Clause 354(1)(a): *....
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....rument of Constitution and Asset Transfer Clause 354(1)(c): * The founding instrument or rules must not allow for the transfer of assets for any purpose other than a charitable purpose. Section 80G(5)(ii): * The instrument or rules must not provide for the transfer or application of income or assets for any non-charitable purpose. Analysis: There is a direct equivalence between the two provisions. This requirement ensures that upon dissolution or winding up, assets are not diverted to private or non-charitable purposes, thus safeguarding the public interest and the integrity of the charitable sector. 3.5. Maintenance of Accounts Clause 354(1)(d): * The organisation must maintain regular accounts of its receipts and expenditure. ....
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....is: This requirement is designed to facilitate the donor's claim for deduction, enhance traceability, and curb fictitious or inflated claims. The prescribed particulars are likely to be standardised to facilitate digital matching of claims and reporting. 3.8. Timelines for Application and Approval Clause 354(2) and Table: 1[*********] Section 80G(5) (Provisos): 1[*********] 3.9. Inquiry and Rejection Mechanism Clause 354(3): 1[*********] Section 80G(5) (Provisos): 1[*********] 3.10. Provisional Approval Clause 354(4): 1[*********] Section 80G(5) (Provisos) 1[*********] 3.11. Renewal and Expiry Clause 354(2) (Table, Sl. No. 4 & 5): 1[*********] Section 80G(5) (Provisos): 1[*....
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....Income-tax Act Analysis/Comment Non-discrimination on religious/caste grounds Expressly prohibits benefit to any particular religious community or caste Similar prohibition: "not expressed to be for the benefit of any particular religious community or caste" Substantially similar; both uphold secular character and public benefit orientation Charitable purpose and religious expenditure Must be established for charitable purpose; religious expenditure capped at 5% of total income Must be established for charitable purpose; Explanation 3 excludes "substantially religious" purposes; Section 80G(5B) allows up to 5% religious expenditure Clause 354(1) codifies the 5% cap directly in main conditions, aligning with judicial/legisl....
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....5 years) 80G(5) (provisos) prescribes application timing and 5-year validity; recent amendments have aligned processes Clause 354(1) provides more granular, case-based timelines, enhancing certainty Commissioner's powers and due process Express power to call for information, verify compliance, and require hearing before rejection/cancellation Similar powers in 80G(5) provisos; opportunity of being heard is mandated Both uphold procedural fairness; Clause 354(1) is more systematically structured Other conditions (legal status, registration, etc.) References to registered non-profit or persons in Schedule III; further details in Rules/Schedules 80G(5)(v) specifies trust, society, company, university, etc. Clause 354(1)....