Explanation of Section 80G Tax Exemption
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What is 80G?
Section 80G donation limit of the Income Tax Act offers a tax deduction on donations or contributions made to certain charitable trusts/ institutions. All donations are not eligible for deduction under section 80; only donations made to prescribed funds qualify as a deduction.
Section 80G: Tax Deduction on Donations to Charitable Trusts
- 80G deduction is allowed for anyone who donates to certain funds or charitable institutes. A donor can be an individual, HUF, Partnership Firm or a Company.
- An individual can be resident or non-resident in India.
- Donations must be made to the Trusts or Institutions operating in India.
What is the Mode of Payment?
- Starting FY 2017-18, any donations made in cash exceeding Rs.2000 will not be allowed as a deduction. Therefore, donations exceeding Rs.2000 should be made in any mode other than cash to qualify as section 80 deductions.
- Donations up to Rs.2000, Mode of payment : Cash/ Cheque/ Draft
- Donations > Rs.2000, Mode of payment : Cheque/ Draft
- Earlier, the maximum limit allowed for donation in cash was Rs.10,000. Still, the Union Budget of 2017 reduced this to Rs.2,000 to curb tax filers from misusing this section by submitting fake donation receipts.
- In-kind contributions such as food material, clothes, medicines etc., do not qualify for deduction under section 80G tax benefit.
How to calculate the amount of deduction under section 80G of the income tax?
Follow these steps to calculate the amount of deduction under 80 G:
- Examine the category into which the fund/charitable institution falls (100% or 50% deduction, with or without a maximum/qualifying limit). For your convenience, we have included the entire list below.
- When a payment is made to the first category, there is no need for further computations; claim 100% or 50% of the contribution amount as taxable income.
- When contributing to the second category, you must first determine the maximum/qualifying limit. The maximum/qualifying level is 10% of “adjusted gross total income.”
- Now use this formula to arrive at the amount of deduction =
- Gross Qualifying limit = All donations made to category 2
- Net Qualifying Limit = 10% of the “adjusted gross total income.”
- Amount Deductible = 100% / 50% of the gift amount, subject to the qualifying maximum.
How to Claim the Deduction?
You must submit the following details in your Income Tax Return to claim section 80 G deduction. Here, Donee is the institution where you have donated your money.
- Name of the Donee
- PAN of the Donee
- Address of the Donee
- Amount of Contribution
As documentary proof, you should have payment stamped receipt from the donee you have made the payment –
- Such a receipt should have the name, address and PAN of the trust or institution mentioned.
- A receipt should also include the name of the donor and details of the amount donated mentioned on it.
- You must mention the registration number of the trust under section 80g deductions and the validity of registration (registration period) on the receipt.
Tax Deduction of Donation under Section 80G
There are two categories of tax deductions under sec 80G. Details are given below :
Section 80G: Tax Deduction on Donation
Category I: 100% Deduction Without Upper Limit.
Any donation made to funds initiated in the name of the Prime Minister, Chief Minister or funds raised for a national cause or relief funds is eligible for maximum exemption under 80G, i.e. 100% deduction without any upper limit. Some of the examples are given below –
- National Defence Fund
- Prime Minister’s National Relief Fund
- National Cultural Fund
- National Children’s fund
- Prime Minister’s Armenia Earthquake Relief Fund
- National Sports Fund
- Clean Ganga Fund
Category I: 50% Deduction Without Upper Limit.
There are only four funds under this 80g deduction limit category. Those are listed below :
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Fund
- Indira Gandhi Memorial Fund
- Rajiv Gandhi Foundation
Category II: 100% Deduction With Upper Limit
- Donations to Government or Approved Local Authority, Institution or association to promote family planning
- Donation by Company for Indian Olympic Association or any other institute established to develop infrastructure for sports and games in India.
Category II: 50% Deduction with Upper Limit
- Donations to Government and Authorised Local Authority, Institutions or Associations for a purpose other than family planning.
- Donation to any authority constituted in India to plan, develop, and improve cities, towns, and villages.
- Donation for repairs or renovation of any notified temples, mosque, Gurudwara, Church, or another place.
Adjusted Total Income
Let us understand what Adjusted Total Income is –
Adjusted total income for this purpose is calculated as Gross Total Income minus :
- All Exempt Incomes – tax-free allowances received like House Rent Allowance or HRA, LTA etc. or agriculture income or dividend income from Mutual Funds, interest on PPF etc.
- Short Term Capital Gain from Equity Shares and Mutual Funds
- Long-term capital gains (Equity & Debt) and,
- All deductions under section 80C to 80U except for 80G.
This article discusses sec 80 deductions in detail. Learn 80G deduction calculation and calculate 80g deduction for ay 2020 21 easily.
4 thoughts on “Explanation of Section 80G Tax Exemption
I wish to Know about the amount of Donation in 80G The gross income after deducting is say 3.80Lakhs and The donation for PM cares fund is done 5000/- (which qualifies for 100% and donations to charitable institute is Rs 9000/ then Will it be Rs. 5000/ Plus (9000 X 50%= 4500) =Rs.9500 in all I can claim is it right? Please reply
Yes. You are correct
I have donated money of 1.1 lakh as donation to the school which is run by a charitable trust. In which category of 4 types it involves? is it 50% deduction of donated amount