Many of us have contemplated giving to charity and doing our bit for society at some point. Donating to a cause you sincerely believe in and making a difference is commendable. Given the nobility of this gesture, the government extends its full support towards charitable services. Section 80G of the Indian Income Tax Act allows you a tax deduction on donations made to a charitable organisation.
What is Section 80G?
You can claim a deduction under Section 80G of the Income Tax Act for contributions made to certain relief funds and charitable institutions. All donations, however, are not eligible for deductions under Section 80G.
Only donations made to prescribed funds qualify as a deduction. This deduction can be claimed by any taxpayer – individuals, companies, firms or any other person.
This deduction is not available if you are opting for the new tax regime.
What is the Mode of Payment?
This deduction can only be claimed when the contribution is made via a cheque, draft, or cash. In-kind contributions such as food, material, clothes, medicines etc., do not qualify for deduction under Section 80G.
Amendment to Section 80G: From financial year 2017-18 onwards, any donations made in cash exceeding Rs 2,000 will not be allowed as a deduction. The donations above Rs 2,000 should be made in any mode other than cash to qualify under Section 80G. Previously, the limit of donation in cash was Rs 10,000.
Eligible Donation Amount: The various donations specified in Section 80G are eligible for a deduction of up to 100% or 50% with or without restriction, as provided in 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:
- Name of the donee
- PAN of the donee
- Address of the donee
- Amount of contribution – the breakup of contribution in cash and another mode
- The amount eligible for deduction
The above details needs to be mentioned in the respective Tables given in the ITR.
- Table A: For donations entitled for 100% deduction without qualifying limit
- Table B: For donations entitled for 50% deduction without qualifying limit
- Table C: For donations entitled for 100% deduction subject to qualifying limit
- Table D: For donations entitled for 50% deduction subject to qualifying limit
List of Donations eligible for 100% deduction without qualifying limit
- National Defence Fund set up by the Central Government
- Prime Minister’s National Relief Fund
- National Foundation for Communal Harmony
- An approved university/educational institution of National eminence
- Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
- Fund set up by a state government for the medical relief to the poor
- National Illness Assistance Fund
- National Blood Transfusion Council or to any State Blood Transfusion Council
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- National Sports Fund
- National Cultural Fund
- Fund for Technology Development and Application
- National Children’s Fund
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
- The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund, Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- The Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
- Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made during January 26, 2001, and September 30, 2001)
- Prime Minister’s Armenia Earthquake Relief Fund
- Africa (Public Contributions – India) Fund
- Swachh Bharat Kosh (applicable from FY 2014-15)
- Clean Ganga Fund (applicable from FY 2014-15)
- National Fund for Control of Drug Abuse (applicable from FY 2015-16)
List of Donations eligible for 50% deduction without qualifying limit
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Relief Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation
List of Donations eligible for 100% deduction subject to 10% of adjusted gross total income
- Donations to the government or any approved local authority, institution or association to be utilised to promote family planning
- Donation by a company to the Indian Olympic Association or any other notified association or institution established in India to develop infrastructure for sports and games in India or sponsor sports and games in India.
How does deduction under Section 80G benefit different types of taxpayers?
The tax benefit will depend on the tax rate applicable to the taxpayer.
For example, Mr S is an individual and M/s. P Pvt. Ltd., a company, gives Rs 1,60,000 to an NGO. The total income for the A.Y. 2020-21 of both Mr S and M/s. P Pvt. Ltd. is Rs 7,00,000. The tax benefit would be as shown in the table:
M/S. P Pvt. Ltd.
|i) Income for the financial year 2020-21||7,00,000||7,00,000 |
|ii) Donation made to NGO||1,60,000||1,60,000 |
|iii) Qualifying amount for deduction (50% of the donation made)||80,000||80,000 |
|iv) Amount of deduction u/s 80G (gross qualifying amount subject to a maximum limit of 10% of the gross total income)||50,000||50,000 |
|v) Taxable income after deduction||6,20,000||6,20,000 |
|A. Tax payable after considering a donation|
-Mr S tax calculated as per income tax slab rate
-M/s. P Pvt Ltd. tax calculated at 30%
|B. Tax payable before donation||52,500||2,10,000|
|C. Tax Benefit from Section 80G deduction ||16,000 ||24,000|
List of Donations eligible for 50% deduction subject to 10% of adjusted gross total income
- Any other fund or institution satisfies the conditions mentioned in Section 80G(5).
- Government or any local authority, to be utilised for any charitable purpose other than promoting family planning.
- Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development or improvement of cities, towns, villages or both.
- Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community.
- For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places.
Section 80GGA allows deductions for donations made towards scientific research or rural development.
This deduction is allowed to all assessees except those who have an income (or loss) from a business and/or a profession.
Mode of Payment:
Donations can be made in the form of a cheque, a draft, or cash. However, cash donations over Rs 2,000 are not allowed as deductions. 100% of the amount donated or contributed is eligible for deductions.
List of Donations eligible under Section 80GGA
- Any sum paid to a research association that undertakes scientific research, or a sum paid to a college, university, or any other institution to be used for scientific research that is all approved by the prescribed authority under Section 35(1)(ii)
- Sum paid to a research association which undertakes research in social science or statistical research, or sum paid to a college, university, or any other institution to be used for the same purpose, and these must all be approved by the prescribed authority under Section 35(1)(iii)
- Sum paid to an approved association or institution which undertakes any programme of rural development and is approved under Section 35CCA
- Sum paid to an approved association or institution which undertakes training of person(s) for implementing programmes of rural development
- Sum paid to a public sector company, local authority or an approved association or institution which carries out projects or schemes approved under Section 35AC.
- Sum paid to notified Rural Development Fund
- Sum paid to notified Fund for Afforestation
- Sum paid to notified National Poverty Eradication Fund
If a deduction has been allowed under Section 80GGA, such expenses shall not be deductible under any other provision of the Income Tax Act.
How to calculate 80GG? How to claim 80GG?
80GG deduction will be allowed as lowest of below mentioned:
- Rs 5,000 per month
- 25% of the adjusted total income
- Actual rent minus 10% of adjusted total income
Adjusted total income
Adjusted total income: Adjusted gross total income is the gross total income (sum of income under all heads) reduced by the aggregate of the following:
- Amount deductible under Sections 80CCC to 80U (but not Section 80G)
- Exempt income
- Long-term capital gains
- Income referred to in Sections 115A, 115AB, 115AC, 115AD and 115D, relating to non-residents and foreign companies
Frequently Asked Questions
I made donations to a trust of Rs 5,000 in cash and the donations to the trust are qualified for a deduction under section 80G. Can I claim a deduction when at the time of filing a return?
No, 80G donations made over Rs 2,000 won’t qualify for a deduction, so you cannot claim a deduction for the same.
Can a partnership firm claim deduction under Section 80G?
Yes, individuals, firms, company or any other person can claim deduction under Section 80G.
I am a non-resident and made donations to Prime Minister’s Relief fund, can I claim deduction under Section 80G?
Yes, the benefit of claiming deduction under Section 80G is allowed to both residents and non-residents.
What is 80GG in income tax? What is rent paid under 80GG?
80GG allows you to claim a deduction for rent paid even if your salary does not include the HRA component or by self-employed individuals having income other than salary. The condition is that you should not own any residential accommodation in the place of residence to claim deduction under 80GG.
Who can claim a deduction in 80GG?
Deduction under Section 80GG is available for employees who do not get HRA as a component of salary. HRA is not received by employees generally doing jobs in the informal sector or by self-employed persons. The person claiming this deduction should not own a house where he resides.
Can I claim both 80GG and HRA?
No, individuals paying rent but not receiving house rent allowance are allowed to claim deduction under Section 80GG. Also, the individual, spouse or children should not own a house property in the place of employment for claiming this deduction.
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