Section 80G - Income Tax Deductions for Donations & Exemptions

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Section 80G of Income Tax Act

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  • 28th Nov 2019
  • 3,451

Section 80G of Income Tax Act

At some point during your life, you may have contributed to charity with the noble intention of giving back something to the society. The government supports such charitable services and allows benefits under section 80G of the Income Tax Act, 1961.

This section allows income tax deductions for donations made to certain charities and relief funds. However, deductions must be only to charities that qualify for such benefits.

What is section 80G?

What is section 80G is a very common question. This section relates to charitable donations and aims to offer tax benefits for philanthropic acts. Tax deductions are offered to assessees for donations made to qualifying charities and relief funds. The donated amount may be claimed as a deduction at the time of filing income tax returns (ITRs).

Who is eligible for claiming section 80G deductions?

Every taxpayer including individuals, Hindu Undivided Families (HUFs), and companies may donate to eligible charities and claim deductions under section 80G. However, deductions are available within the defined limits set by the government authorities.

Donations permitted under section 80G

Any taxpayer who wants to claim deduction under this section needs to ensure that the donations are made to organizations are within the purview of the Act. Only donations made to registered charities and funds qualify for the 80G deduction. Any charity or trust that wants to qualify must register under section 12A. It is critical that the taxpayers check the credentials of the charitable organization prior to donating.

Exemptions under section 80G

All donations do not qualify for these benefits and taxpayers must check the 80G exemption list before proceeding with donations. Donations made to foreign charitable trusts are not eligible for the benefits. Similarly, any donation given to political parties does not qualify for tax benefits under this section.

Deduction under section 80G

Even donations that are eligible for the benefits of 80G of the Income Tax Act must adhere to some conditions. Donations under this section are broadly classified under the following four categories:

1. 100% deductions

Donations under this category are eligible for 100% benefits and are not subject to any qualifying limitations. Money donated to National or State Blood Transfusion Council, National Defence Fund, The National Foundation for Communal Harmony, and the Prime Minister’s National Relief Fund qualify for deductions without any limits.

2. 50% deductions

If donations are made to organizations, such as Indira Gandhi Memorial Fund, Prime Minister’s Drought Relief Fund, and the National Children’s Fund, 50% of the amount is eligible for availing the tax benefits.

3. 100% deduction subject to 10% of the adjusted gross total income

Money donated to the Indian Olympic Association or government or local bodies promoting family planning is eligible for deductions under this category. Only 10% of the total adjusted gross income may be claimed for tax deductions. Any amount exceeding this limit is rounded off to 10% of the gross income.

4. 50% deduction subject to 10% of the adjusted gross total income

Donations given to the government or local authorities that are used for charitable purposes are eligible for deductions under this category.However, only 10% of the total adjusted gross income qualifies for the tax benefits as the maximum cap.

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Adjusted gross total income

To determine the adjusted gross total income, first, add all incomes received under various headings. The following amounts must then be deducted from this total:

  • Deductions under sections 80CCC to 80U excluding 80G
  • Long-term capital gains
  • Any exempt income
  • Earnings under sections 115A, 115AB, 115AC, 115AD, and 115D related to international companies and non-residents

Scope of deduction

Any donation that is claimed towards 80G benefit must adhere to certain criteria. Five of these are listed below:

1. The amount should be paid from taxable or exempt income; donations made through non-taxable income do not qualify for the benefits

2. All donations made to international organizations and political parties are exempt from the benefits

3. Donations made either in check or in cash (up to INR 2,000) are eligible for exemption; material donations like food, clothes, and medicines do not qualify for the benefits

4. Donations given only to registered and valid trusts are eligible for benefits under section 80G

5. Only corporate assessees may claim tax benefits for donations made to the Indian Olympic Association

Documents needed to claim section 80G benefits

All taxpayers who want to claim tax exemption under this section need to provide the following documents:

1. Duly stamped receipt

A duly signed and stamped receipt from the trust or organization that receives the donation must be provided. The receipt must have all information,such as name, address, and Permanent Account Number (PAN) of the trust; name of the donor; and the donation amount.

2. Form 58

This is required if the taxpayer wants to claim a 100% deduction for eligible donations as defined in the aforementioned paragraphs.

3. Trust’s Registration Number

The Income Tax Department issues a registration number to every eligible and qualifying trust. The donation receipt must include this registration number, which must also be valid on the date to ensure that the benefits under Section 80G may be claimed at the time of filing the ITR.

Every income entails a tax liability and taxpayers often want to find ways to reduce their tax outgoing. Section 80G is beneficial in reducing the tax liability of the assessees and it is recommended that every taxpayer takes advantage of the same.

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