Section 80G of the Income Tax Act: Tax Deductions for Donations

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  • Last Updated on 29 January, 2021

Did you know the donations you make can help you save tax?

India is a country of beliefs and devotion. It is an age-long practice of making donations and contributions for good causes in good faith to earn solemn requital for good deeds in India. People of India have been donating in cash and in kind to various trusts, NGOs, charitable organizations, temples etc. sometimes out of kindness, sometimes out of faith. But did you know that these contributions done for the sake of humanity can help you save tax? Here’s how:
 
As per the provisions of section 80G of Income-tax Act, 1961, deductions are available for donations to certain notified funds, charitable institutions or other institutions/ funds set up by the Government of India. 

Who can claim deductions under section 80G?

Any taxpayer whether resident or non-resident can claim deductions under section 80G.

How to make donations/ contributions so as to take deductions under section 80G?

Mode of payment: Cash/ Cheque/ Draft
 
However, if donation exceeding Rs. 2,000/- is made in cash, no deduction is allowed.
 
Further, contributions made in kind also do not qualify for any deduction under this section.

How much deduction can be claimed under section 80G?

Deduction of the amount contributed/ donated from Gross Total Income of the assessee for the previous year depends on the kind of funds/ organizations where such amount is contributed/ donated. The deduction is available as a certain percentage of contributions/ donations made. For the purpose of calculation of the amount that is available as a deduction from Gross Total Income, we can classify the deductions available as:
1. Deduction without any limit.
2. Deduction subject to a limit.
Master Guide to Income Tax Act
 

Deduction available for the amount contributed under section 80G without any limit.

Contributions/ Donations to certain Funds as set up and notified by the Government are eligible for 100% or 50% deduction from Gross Total Income of the assessee. 
 
The following table shows the funds where contributions/ donations made are explicitly eligible for deduction without any limit:
 

TABLE- I

 

S.NO

DONEE

Deduction (as a percentage of amount donated)

    1.

National Defence Fund set up by the Central Government

100%

        2.

Prime Minister’s National Relief Fund

100%

    3.

Prime Minister’s Armenia Earthquake Relief Fund

100%

    4.

Africa (Public Contribution – India) Fund

100%

    5.

National Children’s Fund

100%

    6.

National Foundation for Communal Harmony

100%

    7.

Approved University or Educational Institution of National Eminence

100%

    8.

Chief Minister’s Earthquake Relief Fund, Maharashtra

100%

    9.

Fund set up by State Government of Gujarat for providing relief to the victims of earthquake in Gujarat

100%

   10.

Zila Saksharta Samiti

100%

   11.

National Blood Transfusion Council or a State Blood Transfusion Council

100%

   12.

Fund set up by a State Government for the medical relief to the poor

100%

   13.

Central Welfare Fund of Army or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund

100%

   14.

Andhra Pradesh Chief Minister’s Cyclone Relief Fund

100%

   15.

National Illness Assistance Fund

100%

   16.

Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund

100%

   17.

National Sports Fund or National Cultural Fund or Fund for Technology Development and Application

100%

   18.

Swachh Bharat Kosh

100%

   19.

Clean Ganga Fund

100%

   20.

National Fund for Control of Drug Abuse

100%

   21.

Jawaharlal Nehru Memorial Fund

50%

   22.

Prime Minister’s Drought Relief Fund

50%

   23.

Indira Gandhi Memorial Fund

50%

   24.

Rajiv Gandhi Foundation

50%

Deduction available for the amount contributed under section 80G subject to the limit.

Contribution/ donation made to any other institution or fund notified (other than those mentioned in the table above) under section 80G is also eligible as deduction from Gross Total Income. However, the deduction in respect of such donations/ contributions is restricted to 50% or 100% of the Net Qualifying Amount. The following table shows the funds where contributions/ donations made are eligible for deduction from Gross Total Income subject to the qualifying limit:

TABLE- II

 

S.No.

Particulars

Deduction (as a percentage of net qualifying amount)

       1.

Donation to Government or any approved local authority, institution or association to be utilized for the purpose of promoting family planning.

100%

       2. 

Donation by a company to the Indian Olympic Association or to any other association or institution notified for the development of infrastructure for sports and games in India or the sponsorship of sports and games in India.

(Note: Only the donations/ contributions made by companies are eligible to claim deduction under this i.e. this particular deduction is not available to any other assessee.)

100%

       3.

Funds/ Institutions which satisfies conditions mentioned under section 80G(5)

50%

      4.

Donation to Government or any local authority for the purpose of utilization for any charitable purpose other than promoting family planning

50%

      5.

Any authority constituted in India for dealing with and satisfying the needs for housing accommodation or for the purpose of planning/development of  towns, villages, etc.

50%

      6.

Any corporation specified in section10(26BB) for promoting the interest of minority community

50%

       7.

Any notified temple, mosque, gurdwara, church or other places for the purpose of renovation or repairs

50%

Having said that the deductions are subject to the Net Qualifying Amount, the question that quickly crosses the mind is what is Net Qualifying Amount?

Net Qualifying Amount refers to the 10% of the adjusted gross total income or the donations/ contributions made (excluding the donation/ contribution to the specified funds as mentioned in Table-I), whichever is less.  

How to calculate Adjusted Gross Total Income (AGTI)?

The calculation of AGTI is very simple. To calculate AGTI, the steps are:

Gross Total Income XXX
 
Less: Exempt income               (xxx)
Less: Long term Capital Gain               (xxx)
Less: Short term Capital gain on sale of shares u/s 111A (taxable @10%)   (xxx)
Less: Deductions u/s 80CCC to 80U (excluding 80G) (xxx)
Less: Income referred to in sec 115A, 115AB, 115AC or 115 AD (xxx)
 
Adjusted Gross Total Income                 XXX
Therefore, the amount of deduction available under section 80G having constraint of the limit shall be:
 

Deduction = 50% or 100% 10% of AGTI 

(as the case may be)* Or      (Whichever is less)

Total donations u/s 80G

*Refer Table- II

 

What Proof of Payment is required to be submitted to claim deduction under section 80G

The assessee claiming deduction under section 80G is required to present proof of payment. The assessee should submit the receipt issued by the donee-institute to get the benefit of the deduction. Such receipt should have the name, address, PAN and the registration number of Donee under section 80G along with the validity of registration and the name and amount donated/ contributed by the Donor. 

Proof of Payment in case the employer donates by way of consolidated cheque?

In case where donations/ contributions are made to:

– National Defence Fund

– Army Central Welfare Fund

– Indian Naval Benevolent Fund

– Air Force Central Welfare Fund

– National Relief Fund

– Chief Ministers Relief Fund

– Lieutenant Governors Relief Fund

through the employer by a consolidated cheque, the proof of payment will be the certificate issued by DDO/ Employer in this behalf, and accordingly, the deduction will be available on the basis.

Do good, Receive good

The reason for the Government of India providing for such relaxation is promoting the little acts of kindness where the contributions/ donations are made to make a difference. It is one way of encouraging people to come forward to make contributions/ donations for the causes that are intended to bring smile on the faces of fellow beings and for the development of the nation. The government of India ensures that for every good cause you donate, you receive a reward in terms of the tax benefit by way of tax deductions for the contributions/ donations made to notified charitable organizations/ trusts/ funds/ institutions, etc. So, whenever you’re donating for a good cause, don’t forget to claim your reward. 

Author Bio: Radhika Daga is a CA Final student. Connect with her on Linkedin @www.linkedin.com/in/radhikadaga.

 

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