Section 80G: Income Tax Deductions for Donations
Aesop said, ‘No act of kindness, no matter how small, is ever wasted’. He highlights the importance of charity and how a small act can make a big difference in someone’s life.
Charitable acts are rewarding, both for the donor and the done. While the donor gets the much-needed help, the donor gets mental and emotional satisfaction, not to mention the blessings. Moreover, the Income Tax Act, 1961 also provides financial rewards to donors on their charitable contributions.
Do you know what these rewards are?
Section 80G of the Income Tax Act, 1961
The Income Tax Act contains Section 80G which specifically provides tax benefits on donations. According to the provisions of this section, you can claim a deduction on the amount of donation made to recognized relief funds and organisations. The section allows deductions on monetary donations. Donations in kind do not attract any tax benefits.
Important aspects of Section 80G
Some of the important aspects of Section 80G are mentioned below. You should remember these aspects when claiming a deduction on your donations –
- In the case of cash donations, deduction is allowed only up to Rs.2000. If the amount is higher, it should be paid through cheque, draft or digitally
- You can claim a deduction if you are a registered taxpayer
- When you donate, ensure to collect the receipt of the same. This receipt is the proof of donation which would be needed to claim a deduction from your taxable income. The receipt should contain the name, address and the PAN Card number of the charitable institution to whom the donation is made.
- Ensure that Charitable institution is registered with Income Tax authorities of India and qualifies to provide 80G benefit.
Amount of deduction available
The deduction is available in either of the two instances –
- Without any upper limit
- With an upper limit
Moreover, under each instance, 50% or 100% of the donated amount can be claimed as a deduction depending on where you are donating.
Let’s understand in details –
- Deductions without any upper limit
In this case, 50% or 100% of the amount donated would be allowed as a deduction, without any maximum limit. Some of the charities that qualify for 50% deduction under this category are as follows –
- Rajiv Gandhi Foundation
- PM’s Drought Relief Fund.
- Indira Gandhi Memorial Trust
- Jawaharlal Nehru Memorial Fund.
- On the other hand, charities where 100% of the donated amount is allowed as a deduction are as follows –
- Central Government’s National Defence Fund
- National Foundation for Communal Harmony
- National Illness Assistance Fund
- Zila Saksharta Samiti, that has been created in a district under the chairmanship of the district’s Collector
- PM’s National Relief Fund
- A recognized educational institute or university that has national eminence. Examples include the IITs, IIMs, etc.
- National Sports Fund
- National Cultural Fund
- National/State Blood Transfusion Council.
- Donation to funds created by State Governments that are meant to provide medical assistance to poor
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities.
- Fund for Technology Development and Application.
- National Children’s Fund.
- Chief Minister’s or Lieutenant Governor’s Relief Fund for a State or Union Territory.
- Prime Minister’s Armenia Earthquake Relief Fund.
- Army Central Welfare Fund.
- Indian Naval Benevolent Fund.
- Air Force Central Welfare Fund.
- Clean Ganga Fund.
- Africa (Public Contributions – India) Fund.
- Swachh Bharat Kosh
- National Fund for Drug Control and Abuse.
- Deductions with an upper limit
In this case, there is a restriction on the deduction that you can avail of on your charitable deductions. This limit is defined as 10% of your adjusted gross total income.
To calculate the adjusted gross total income, your income earned from all sources is aggregated and the following items are deducted from it –
- Income exempted from tax
- Deductions that are available under Section 80CCC to Section 80U, excluding Section 80G.
- Any long term capital gain
- Income that is earned by NRIs and foreign companies under the provisions of Sections 115A, 115AB, 115AD, 115AC, and 115D.
In this category as well, 50% or 100% of your donation would be allowed as a deduction depending on which charity that you choose.
Here’s the list of charities which allow 50% of the donation to be allowed as a deduction subject to the maximum limit –
- Institutions or funds that fulfil the conditions laid down under Section 80G (5).
- Corporations, defined under Section 10 (26BB), that are engaged in promoting the interests of Indian minority communities
- Governments or local authorities that perform charitable activities excluding family planning.
- An Indian authority created for planning, improving and developing cities, towns, and villages.
- Donations towards renovations and repairs of notified places of worship
- On the other hand, charities that allow 100% of the donated amount as a deduction are as follows –
- Governments, associations, institutions or local authorities promoting family planning
- Company donations made towards notified institutions, associations, or the Indian Olympic Association that is engaged in developing sports infrastructure or providing sports sponsorships in India
Winston Churchill said, ‘We make a living by what we get, but we make a life by what we give’. So, donate to charities that are close to your heart and make a difference. Also get rewarded with tax benefits in the process. Understand these tax benefits and check how much deduction that you can claim so that you can plan and file your taxes correctly.