Section 80G of the Income Tax Act allows taxpayers to claim deductions for donations made to specified funds and charitable institutions. This deduction aims to encourage philanthropy and support organizations engaged in social welfare activities.
By leveraging Section 80G, taxpayers can not only contribute to noble causes but also reduce their taxable income.
Donations to certain funds and institutions qualify for deductions under Section 80G. These include contributions to government relief funds, charitable organizations, and specific trusts.
However, it is essential to ensure that the recipient is approved by the Income Tax Department and the donation meets the prescribed conditions to avail the deduction.
Eligibility to Claim Deduction Under Section 80G
Section 80G of the Income Tax Act, 1961, in India, allows taxpayers to claim deductions for donations made to certain charitable institutions and relief funds. Here’s a detailed look at the eligibility criteria and other relevant information:
Types of Taxpayers:
-
- Individuals (both residents and non-residents)
- Hindu Undivided Families (HUFs)
- Companies
- Firms
- Any other person
- However, not all donations are eligible for deductions. Only donations made to prescribed funds qualify.
- Note: This deduction is not available if an individual taxpayer opts to pay taxes under the new tax regime (115BAC).
How to Claim the Deduction under Section 80G?
Claiming a deduction under Section 80G of the Income Tax Act in India involves a few specific steps. Section 80G offers tax benefits to individuals who donate to certain charitable institutions and funds. Here’s a detailed guide on how to claim this deduction:
Steps to claim deduction under Section 80G –
- Ensure Eligibility of the Donation:
- Verify that the donation is made to an eligible institution or fund recognized under Section 80G. The organization should have a valid 80G certificate.
- Obtain Receipt of Donation:
- Obtain a donation receipt from the organization. The receipt must include the following details:
- Name and address of the organization.
- PAN of the organization.
- Registration number of the organization under Section 80G.
- Name of the donor.
- Amount donated (in words and figures).
- Date of donation.
- Obtain a donation receipt from the organization. The receipt must include the following details:
- Mode of Payment:
- Ensure the donation is made through eligible modes of payment such as cheque, demand draft, or electronic transfer. Donations made in cash exceeding ₹2,000 are not eligible for tax benefits.
- Calculate the Deduction:
- Deductions under Section 80G can be 100% or 50% of the donation amount, with or without qualifying limits. Refer to the specific conditions applicable to the institution you donated to.
- Filing the Income Tax Return (ITR):
- While filing your ITR, under the “Deductions” section, locate the field for Section 80G.
- Enter the relevant details of your donation, including:
- Name and address of the donee.
- PAN of the donee.
- Amount donated.
- Deduction percentage applicable (50% or 100%).
- These details should be mentioned in the respective tables given in the ITR:
- Table A: For donations entitled to 100% deduction without a qualifying limit
- Table B: For donations entitled to 50% deduction without a qualifying limit
- Table C: For donations entitled to 100% deduction subject to a qualifying limit
- Table D: For donations entitled to a 50% deduction subject to the qualifying limit
- Documentation:
- Keep a copy of the receipt and the 80G certificate of the organization for your records and future reference. This may be required if your return is selected for scrutiny.
Example –
If you donated ₹10,000 to a recognized charitable institution that qualifies for a 50% deduction under Section 80G, you can claim ₹5,000 as a deduction from your gross total income.
Quantum of Deduction
100% Deduction Without Qualifying Limit: Some donations qualify for a full deduction without any upper limit (e.g., donations to the National Defence Fund).
50% Deduction Without Qualifying Limit: Some donations are eligible for a 50% deduction without any upper limit.
100% Deduction Subject to Qualifying Limit: Donations qualifying for a full deduction but subject to a limit of 10% of the adjusted gross total income (e.g., donations to government or any approved local authority for the promotion of family planning).
50% Deduction Subject to Qualifying Limit: Donations that are eligible for a 50% deduction, subject to a limit of 10% of the adjusted gross total income.
List of donations eligible for 100% deduction without qualifying limit
In India, under Section 80G of the Income Tax Act, donations to certain funds are eligible for a 100% deduction without any qualifying limit. Here is a list of such funds and institutions:
- National Defence Fund set up by the Central Government
- Prime Minister’s National Relief Fund
- Prime Minister’s Armenia Earthquake Relief Fund
- the Prime Minister’s National Relief Fund or the Prime Minister’s Citizen Assistance and Relief in Emergency Situations Fund (PM CARES FUND)
- The Africa (Public Contributions – India) Fund
- National Children’s Fund
- National Foundation for Communal Harmony
- Approved university or educational institution of national eminence
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Zila Saksharta Samiti (District Literacy Society), constituted in any district under the chairmanship of the Collector of that district
- National Blood Transfusion Council or a State Blood Transfusion Council
- State Government’s Fund for providing medical relief to the poor
- National Illness Assistance Fund
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- National Fund for Control of Drug Abuse
- Clean Ganga Fund
- Swachh Bharat Kosh (by the Central Government)
- National Relief Fund (by the President)
These donations provide substantial tax benefits as they do not have a qualifying limit, making them particularly attractive for taxpayers looking to maximize their deductions under Section 80G.
List of donations eligible for 50% deduction without qualifying limit
In India, donations made to certain specified funds, charitable institutions, or causes are eligible for tax deductions under Section 80G of the Income Tax Act, 1961. Some donations are eligible for a 50% deduction without any qualifying limit.
Here is a list of such donations:
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Relief Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation
Note: Budget 2023 provided that donations made to the following funds will not be eligible for any deductions under 80G:
- Jawaharlal Nehru Memorial Fund
- Rajiv Gandhi Foundation
- Indira Gandhi Memorial Trust
List of donations eligible for 100% deduction subject to 10% of adjusted gross total income
In India, donations eligible for a 100% deduction under Section 80G of the Income Tax Act are subject to a cap of 10% of the adjusted gross total income. Here are the types of donations that fall under this category:
- Government or approved public charitable institutions: Contributions to such institutions aimed at promoting family planning qualify for a 100% deduction. This is subject to a limit of 10% of the adjusted gross total income.
- Indian Olympic Association or any other notified association/institution: Donations to these entities, which aim at the development of infrastructure for sports and games or the sponsorship of sports and games in India, are eligible for a 100% deduction, again subject to a maximum of 10% of the adjusted gross total income.
List of Donations eligible for 50% deduction subject to 10% of adjusted gross total income
- Any other fund or institution satisfies the conditions mentioned in Section 80G(5).
- Government or any local authority, to be utilised for any charitable purpose other than promoting family planning.
- Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development or improvement of cities, towns, villages or both.
- Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community.
- For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places.
Adjusted Gross Total Income
Adjusted gross total income refers to the gross total income (GTI) after deducting the following:
- Deductions under Sections 80C to 80U (excluding Section 80G)
- Short-term capital gains under Section 111A
- Long-term capital gains
- Income referred to in Sections 115A, 115AB, 115AC, 115AD, 115D, 115DA, 115DB, 115E, 115F, 115G, 115H, 115-I, and 115JB
- Any income on which income tax is not payable
Example for Clarity –
If the adjusted gross total income of an individual is ₹10,00,000, then the total donations eligible for a 100% deduction under the specified categories cannot exceed ₹1,00,000 (i.e., 10% of ₹10,00,000).
How does deduction under Section 80G benefit to taxpayers?
Section 80G of the Income Tax Act, 1961 provides deductions for donations made to certain relief funds and charitable institutions. The amount of deduction depends on the type of taxpayer and the nature of the donee. Here are examples of how deductions under Section 80G apply to different types of taxpayers:
1. Individuals and Hindu Undivided Families (HUFs)
Example –
Donor: Mr. Sharma
Gross Total Income: ₹10,00,000
Donation Made: ₹1,00,000 to Prime Minister’s National Relief Fund (100% deduction without qualifying limit)
Calculation:
- Eligible Donation: ₹1,00,000
- Deduction under Section 80G: 100% of ₹1,00,000 = ₹1,00,000
- Taxable Income after deduction: ₹10,00,000 – ₹1,00,000 = ₹9,00,000
2. Companies
Example –
Donor: ABC Pvt. Ltd.
Gross Total Income: ₹50,00,000
Donation Made: ₹5,00,000 to a recognized charitable trust (50% deduction subject to 10% of adjusted gross total income)
Calculation:
- Adjusted Gross Total Income: ₹50,00,000 (assuming no other deductions)
- Maximum eligible donation (10% of adjusted gross total income): 10% of ₹50,00,000 = ₹5,00,000
- Eligible Donation for 50% deduction: ₹5,00,000 (entire donation eligible)
- Deduction under Section 80G: 50% of ₹5,00,000 = ₹2,50,000
- Taxable Income after deduction: ₹50,00,000 – ₹2,50,000 = ₹47,50,000
3. Firms
Example –
Donor: XYZ Partnership Firm
Gross Total Income: ₹20,00,000
Donation Made: ₹1,50,000 to an approved educational institution (50% deduction subject to 10% of adjusted gross total income)
Calculation:
- Adjusted Gross Total Income: ₹20,00,000 (assuming no other deductions)
- Maximum eligible donation (10% of adjusted gross total income): 10% of ₹20,00,000 = ₹2,00,000
- Eligible Donation for 50% deduction: ₹1,50,000 (entire donation eligible)
- Deduction under Section 80G: 50% of ₹1,50,000 = ₹75,000
- Taxable Income after deduction: ₹20,00,000 – ₹75,000 = ₹19,25,000
4. Limited Liability Partnerships (LLPs)
Example –
Donor: LMN LLP
Gross Total Income: ₹30,00,000
Donation Made: ₹3,00,000 to a government-recognized scientific research association (100% deduction without qualifying limit)
Calculation:
- Eligible Donation: ₹3,00,000
- Deduction under Section 80G: 100% of ₹3,00,000 = ₹3,00,000
- Taxable Income after deduction: ₹30,00,000 – ₹3,00,000 = ₹27,00,000
Notes:
- Donations are eligible for deduction only if they are made through cash, cheque, draft, or other prescribed modes.
- Cash donations exceeding ₹2,000 do not qualify for deduction.
- Donations must be to approved institutions and funds to be eligible for deduction under Section 80G.
- The deduction under Section 80G can be 100% or 50%, with or without qualifying limits, depending on the donee organization.
Discover more from taxdot.in
Subscribe to get the latest posts sent to your email.