Charitable Donations

What are Charitable Donations?

Charitable donations are contributions to certain relief funds or philanthropic institutions recognised under the Income Tax Act of 1961 and eligible for tax deductions under Section 80G. The deduction is available for individuals and entities, such as companies and firms, provided the donations meet specific criteria set by the Act.

Eligibility for Tax Deduction

1. Eligible Donations
   • Contributions must be made to prescribed funds or institutions.
   • Examples: Prime Minister’s National Relief Fund, specific educational and charitable trusts, and government-approved institutions.
2. Mode of Payment
   • Eligible: Cash (up to ₹2,000), cheque, demand draft, or digital modes like online transfers.
   • Ineligible: Donations made in kind (e.g., goods, services) or cash exceeding ₹2,000 (from FY 2017-18 onwards).
3. Deduction Limits
   • 100% Deduction (without limit): Donations to institutions like the National Defence Fund.
   • 50% Deduction (without limit): Donations to certain charitable trusts.
   • 50% Deduction (subject to 10% of adjusted gross total income): Contributions to other specified organisations.

Steps to Claim Tax Deduction for Charitable Donations

1. Collect Relevant Information
   • Name of the donee institution.
   • PAN of the donee institution.
   • Address of the donee.
   • Amount of the donation.
2. Obtain a Donation Receipt: Ensure the receipt includes the donee’s name, PAN, address, and registration number under Section 80G.
3. Choose the Correct ITR Form: Select the appropriate income tax return form (e.g., ITR-1, ITR-2) based on your income and sources.
4. Fill out the Deduction Section: Enter the donation details under the deductions section (Chapter VI-A) when filing your return.
5. Submit Documentary Proofs if Required: Retain the receipt and other necessary documents, as they may be required during tax assessments or audits.
6. E-Filing for Transparency: Use online income tax portals to ensure accurate and transparent reporting of donations.

Key Takeaways

• Carryforward of Excess Donations: Donations exceeding the eligible deduction cannot be carried forward to subsequent financial years or adjusted.
• Taxpayer Eligibility: This deduction is available to any taxpayer (individual, HUF, company, firm, etc.).