Categories: Financial Planning Income Tax Planning

Explanation of Tax Deduction under Section 80G

Section 80G of the Income Tax Act offers a tax deduction on donations or contributions made to certain charitable trusts/ institutions under the Income Tax Act. All donations are not eligible for deductions under section 80G, only donations made to prescribed funds qualify as a deduction.

Section 80G : Deduction on Donations to Charitable Trusts

Introduction

Section 80G of the Income Tax Act offers a tax deduction on donations or contributions made to certain charitable trusts/ institutions under the Income Tax Act. All donations are not eligible for deductions under section 80G, only donations made to prescribed funds qualify as a deduction.

Section 80G : Tax Deduction on Donations to Charitable Trusts

Eligibility

  1. Deduction can be claimed by anyone who donates to certain funds or charitable institutes. Donor can be an individual, HUF, Partnership Firm or a Company.
  2. Individual can be resident or non-resident in India.
  3. Donations must be made to the Trusts or Institutions operating in India.

What is the Mode of Payment?

  • Starting FY2017-18 any donations made in cash exceeding Rs.2000 will not be allowed as deduction. Therefore the donations exceeding Rs.2000 should be made in any mode other than cash to qualify as deduction u/s 80G.
    1. Donations up to Rs.2000, Mode of payment : Cash/ Cheque/ Draft
    2. Donations > Rs.2000, Mode of payment : Cheque/ Draft
  • Earlier, the maximum limit allowed for donation in cash was Rs.10,000, but the Union Budget of 2017 reduced this to Rs.2,000 in order 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.

How to Claim the Deduction?

To be able to claim this deduction the following details have to be submitted in your Income Tax Return. Here, Donee is the institution where you have donated your money.

  1. Name of the Donee
  2. PAN of the Donee
  3. Address of the Donee
  4. Amount of Contribution

As a documentary proof, you should have payment stamped receipt from the donee you have made the payment –

  • Such receipt should have the name, address and PAN of the trust or institution mentioned on it.
  • Receipt should also include the name of the donor and details of amount donated mentioned on it.
  • Registration number of the trust under section 80G and validity of registration (registration period) must be mentioned on the receipt.

Tax Deduction of Donation under Section 80G

There are 2 categories of tax deductions under section 80G. Details are given below :

Section 80G : Tax Deduction on Donation
Section 80G  : Tax Deduction on Donation
Category I : 100% Deduction Without Upper Limit

Any donation made to funds which are initiated in the name of Prime Minister, Chief Minister or funds raised for a national cause or relief funds are eligible for claiming 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 4 funds under this category. Those are listed below :

  • Jawaharlal Nehru Memorial Fund
  • Prime Minister’s Drought Fund
  • Indira Gandhi Memorial Fund
  • Rajeev Gandhi Foundation
Category II : 100% Deduction With Upper Limit
  • Donations to Government or Approved Local Authority, Institution or association for the purpose of promoting family planning
  • Donation by Company for Indian Olympic Association or any other institute established for the development of infrastructure for sports and games in India.
Category II : 50% Deduction with Upper Limit
  • Donations to Government and Authorized Local Authority, Institutions or Associations for the purpose other than family planning.
  • Donation to any authority constituted in India for the purpose of planning, development and improvement of cities, towns, villages.
  • Donation for repairs or renovation of any notified temples, mosque, Gurudwara, Church or any other place.
Ajusted Total Income

Let us understand what is Adjusted Total Income –

Adjusted total income for this purpose is calculated as Gross Total Income minus :

  1. All Exempt Incomes – tax free allowances received like HRA, LTA etc. or agriculture income or dividend income from Mutual Fund, interest on PPF etc.
  2. Short Term Capital Gain from Equity Shares and Mutual Fund
  3. Long-term capital gains (Equity & Debt) and,
  4. All deductions under section 80C to 80U except for 80G.
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