Tax deductions are crucial in reducing taxable income and lowering tax liability. Section 80G of the Income Tax Act allows taxpayers to claim deductions for donations to specified funds and charitable institutions. Understanding the nuances of Section 80G can help taxpayers optimise their tax savings while contributing to charitable causes.
Section 80G of the Income Tax Act
Section 80G of the Income Tax Act of 1961 allows taxpayers to claim deductions for donations from certain funds and charitable institutions. These deductions are intended to encourage philanthropy and promote social welfare activities. Subject to specified conditions, taxpayers can reduce their taxable income by the amount donated.
To claim the deduction provided by section 80G, the taxpayer must obtain a receipt or an 80G certificate from the fund or institution to which the donation was given. The receipt must include the institution or fund’s name, address, PAN number, the donated amount, and registration number under section 80G.
Latest Updates on Section 80G
In the Budget for the year 2023, it was declared that contributions made to the subsequent funds would not qualify for any deductions under section 80G:
- National Defense Fund
- Prime Minister’s National Relief Fund
- The National Foundation for Communal Harmony
- National/State Blood Transfusion Council
Additionally, donations eligible for a 50% deduction without any qualifying limit include the following:
- Jawaharlal Nehru Memorial Fund
- Rajiv Gandhi Foundation
- Indira Gandhi Memorial Trust
- Prime Minister’s Drought Relief Fund
Eligibility to Claim Deduction Under Section 80G
The following taxpayers can claim a deduction under this section:
- Individuals
- Companies
- Firms
- Hindu Undivided Firm (HUF)
- Non-Resident Indian (NRI)
- Any other person
Recognising that not all donations are eligible for deductions under Section 80G is essential. Deductions only apply to donations made to designated funds as the regulations prescribe.
Please note that this deduction is unavailable if you opt for the New Tax Regime.
What categories of donations qualify for deductions under Section 80G?
To qualify for a deduction under Section 80G, the donation must be made in monetary form, excluding goods or services.
Only cash, cheque, or electronic transfer donations are eligible for the deduction.
Furthermore, it’s crucial to recognise that cash donations exceeding Rs. 2,000 are not eligible for the deduction under Section 80G. Donors should prioritise obtaining a receipt for their donation detailing the donation amount, the charitable institution or fund’s name and address, and the registration number under Section 80G.
Donors should verify the eligibility criteria and maximum deduction limit under Section 80G for each institution or fund before donating. It’s crucial to note that these limits and criteria may differ depending on the specific institution or fund to which the donation is directed.
How can you claim the deduction under Section 80G?
To claim this deduction, the following details must 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
These details should be mentioned in the respective tables provided in the Income Tax Return (ITR):
- Table A: For donations entitled to 100% deduction without qualifying limit
- Table B: For donations entitled to 50% deduction without qualifying limit
- Table C: For donations entitled to 100% deduction subject to a qualifying limit
- Table D: For donations entitled to a 50% deduction subject to the qualifying limit.
How much deduction is allowed under section 80G?
Individuals can claim a deduction under Section 80G for donations made to eligible institutions or funds, up to 100% or 50% of the donated amount, depending on the specific institution or fund receiving the donation.
Companies can avail deductions under Section 80G for donations made to eligible institutions or funds, with a maximum limit of either 50% or 100% of the donated amount. However, it’s crucial to understand that specific conditions and restrictions govern the deduction limit for companies.
How can donations be made under Section 80G?
Here are the primary methods through which donations can be made:
- Cash (for donations under Rs 2,000): Contributions in cash are permissible for deductions below Rs 2,000.
- Cheque: Donations made by cheque are entitled to Section 80G deductions.
- Demand Draft: Contributions via demand drafts are also eligible for Section 80G benefits.
Documents Needed to Claim Tax Deductions Under Section 80G?
Taxpayers aiming to claim tax deductions under Section 80G must possess the following documents to support their claim:
- Duly stamped receipt: It is imperative to obtain a receipt issued by the charity/trust to which the donation is made. The receipt should include the donor’s name, address, donated amount, and the trust’s PAN number.
- Form 58: Form 58 is necessary when a donor intends to claim a 100% deduction.
- Registration number of the trust: The Income Tax Department assigns a registration number to all eligible trusts under this section. Donors should ensure that the receipt contains the trust registration number.
What constitutes the “Adjusted Gross Total Income” to calculate tax exemption under Section 80G?
Adjusted Gross Total Income in this context refers to the total of your income under all heads less the following amounts:
- Amount deductible under sections 80C to 80U (excluding Section 80G deductions)
- Long-term capital gains
- Short-term capital gains under Section 111A
- Income on which income tax is not payable
- Income as referred to in Sections 115A, 115AB, 115AC, or 115AD.
How to Calculate the Deduction Amount Under Section 80G of the Income Tax?
To calculate the amount of deduction u/s 80G, follow these steps:
- Identify the classification of the fund or charitable institution to ascertain the applicable deduction rate (either 100% or 50%) with or without a maximum/qualifying limit. Refer to the comprehensive list provided below.
- If the payment is directed towards an entity falling under the first category, no further computations are necessary; claim either 100% or 50% of the donation amount, depending on the taxable income.
- For payments to entities falling under the second category, determine the maximum/qualifying limit. This limit is 10% of the “adjusted gross total income.”
Utilise the following formula to calculate the deduction amount:
- a) Gross Qualifying limit = Total donations made to Category 2.
- b) Net Qualifying limit = 10% of the “adjusted gross total income.”
- c) Deductible Amount = 100%/50% of the donation amount limited to the net qualifying limit.
This process ensures accurate calculation of the deduction amount under Section 80G based on the qualifying limits and donation categories.
How can one seek a deduction under Section 80G for contributions to the Ayodhya Ram Mandir Trust?
Below are essential points to consider concerning deductions u/s 80G for donations to the Ram Mandir:
Eligibility for Deduction:
- 50% of the amount donated for the renovation/repair of the Mandir to the Shri Ram Janmabhoomi Teerth Kshetra Trust is eligible for deduction under Section 80G.
- However, if the total donation to the Shri Ram Trust surpasses 10% of your adjusted gross total income (GTI), any surplus beyond this 10% limit will not qualify for deduction.
Points to Note While Claiming Deduction:
- Obtain a valid donation receipt from the Shri Ram Trust specifically for the Ram Mandir donation.
- Donations can be facilitated through drafts, cheques, or online transactions. However, cash donations exceeding INR 2,000 are ineligible for deduction.
- In-kind donations are not applicable for deduction claims.
- Individuals opting for the new tax regime cannot avail of benefits under Section 80G for their contributions.
- Ensure that contributions are earmarked for the renovation or repair of the temple to meet the criteria for deductions.
Reporting in Income Tax Return (ITR):
To accurately claim the deduction for your donation in u/s 80G of your Income Tax Return (ITR) form, provide the following details:
- Name and address of the Donee: Provide the complete details of the Shri Ram Trust, including its name and address.
- PAN of the Donee: Input the Permanent Account Number (PAN) of the Shri Ram Trust.
- Amount of Donation: Specify the total amount donated to the Shri Ram Trust for the renovation or repair of the Ram Mandir.
- Eligible Deduction: Calculate the eligible deduction amount, considering that 50% of the donated amount is eligible for deduction under Section 80G.
- Mode of Donation: Indicate whether the donation was made via drafts, cheques, online modes, or any other acceptable method.
- Date of Donation: Provide the date(s) on which the donation(s) were made to the Shri Ram Trust.
Ensure all information provided is precise and backed by legitimate documentation to prevent inconsistencies during the tax evaluation.
By following these instructions and maintaining thorough documentation, donors can effectively claim deductions under Section 80G for their contributions towards the renovation/repair of the Ram Mandir through the Shri Ram Trust.
Criteria for Deductions:
- Eligible Donations: Section 80G of the Indian Income Tax Act specifies various donations eligible for deductions.
- Deduction Percentage: Deductions permissible under Section 80G may vary, ranging from 100% to 50%, and may come with or without limitations as outlined within the provisions of the section.
Eligible List of Funds or Charitable Institutions for Donations Under Section 80G
Listed below are the categories of donations eligible for deduction:
Table A: For donations entitled to 100% deduction without qualifying limit
| FUND NAME | DEDUCTION ALLOWED |
|---|---|
| Africa (Public Contributions – India) Fund | 100% |
| An approved university/educational institution of National eminence | 100% |
| Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat | 100% |
| Any trust, institution or fund to which Section 80G(5C) applies for providing relief to the victims of the earthquake in Gujarat (contribution made between January 26, 2001, and September 30, 2001) | 100% |
| Chief Minister’s Earthquake Relief Fund, Maharashtra | 100% |
| Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory | 100% |
| Clean Ganga Fund (applicable from FY 2014-15) | 100% |
| Fund for Technology Development and Application | 100% |
| Fund set up by a state government for medical relief to the poor | 100% |
| National Blood Transfusion Council or any State Blood Transfusion Council | 100% |
| National Children’s Fund | 100% |
| National Cultural Fund | 100% |
| National Defence Fund set up by the Central Government | 100% |
| National Foundation for Communal Harmony | 100% |
| National Fund for Control of Drug Abuse (applicable from FY 2015-16) | 100% |
| National Illness Assistance Fund | 100% |
| National Sports Fund | 100% |
| National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities | 100% |
| Prime Minister’s Armenia Earthquake Relief Fund | 100% |
| Prime Minister’s National Relief Fund | 100% |
| Swachh Bharat Kosh (applicable from FY 2014-15) | 100% |
| 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 | 100% |
| The Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993 | 100% |
| Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district | 100% |
Table B: For donations entitled to 50% deduction without qualifying limit
| FUND NAME | DEDUCTION ALLOWED |
|---|---|
| Prime Minister’s Drought Relief Fund | 50% |
| Jawaharlal Nehru Memorial Fund (Not eligible for deduction from FY 2023-24 onwards) | 50% |
| Indira Gandhi Memorial Trust (Not eligible for deduction from FY 2023-24 onwards) | 50% |
| Rajiv Gandhi Foundation (Not eligible for deduction from FY 2023-24 onwards) | 50% |
Table C: For donations entitled to 100% deduction subject to a qualifying limit
| FUND NAME | DEDUCTION ALLOWED |
|---|---|
| Govt. or any approved local authority, institution, or association to be utilized for promoting family planning | 100% |
| The Indian Olympic Association or any other notified association or institution for the development of infrastructure for the development of sports and games in India or sponsorship of sports and games (Note: this deduction is only available to companies) | 100% |
Table D: For donations entitled to a 50% deduction subject to the qualifying limit
| FUND NAME | DEDUCTION ALLOWED |
|---|---|
| Any other approved fund or institution which satisfies the conditions mentioned in section 80G(5) | 50% |
| Govt. or any local authority, institution or association to be utilized for any charity purpose other than the purpose of promoting family planning | 50% |
| An authority constituted in India for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning the development of towns, villages, etc. | 50% |
| A corporation specified in section 10(26BB) for promoting the interest of minority community | 50% |
| Any notified temple, mosque, gurudwara, church, or other place notified by the CG (for renovation or repair) | 50% |
Taxpayers should refer to the prescribed lists to ascertain the eligibility of the donations made for claiming deductions under Section 80G.
Final Words
In conclusion, Section 80G of the Income Tax Act allows taxpayers to contribute to charitable causes while availing of tax deductions. By understanding the provisions of Section 80G and adhering to the prescribed conditions, taxpayers can optimise their tax savings and support social welfare activities simultaneously.