Section 80GGA of the Income Tax Act provides a valuable avenue for incentivising contributions towards research and development activities in India. This section encourages individuals and entities to support scientific research, social sciences, rural development, and other approved projects. Section 80GGA is crucial in driving growth, knowledge creation, and societal progress by offering tax deductions on donations to eligible organisations engaged in research and development endeavours.
What is Section 80GGA?
Section 80GGA is a provision under the Income Tax Act of India allowing taxpayers to claim deductions for donations to scientific research or rural development. Donations eligible for deduction under this section include those made to approved scientific research, rural development institutions, or funds.
Which donations are eligible under Section 80GGA?
The following contributions qualify for deductions within this section:
- Payments made to a designated Rural Development Fund.
- Any financial support extended to a research association sanctioned by the authority engaged in scientific research.
- Funds allocated to a college, university, or institution dedicated to scientific research and endorsed by the authority.
- Contributions made to an accredited association executing rural development initiatives.
- Financial assistance provided to an approved association engaged in training individuals to implement rural development programs.
- Donations made to an approved institution, public sector company, or local authority for executing projects under section 35AC.
- Contributions towards a recognised afforestation fund.
- Payments directed to an accredited national poverty eradication fund.
Note: Expenses eligible for deduction under section 80GGA cannot be claimed under any other section of the Income Tax Act.
Which methods of donation qualify for exemption?
Contributions can be facilitated via cheque, cash, or draft. All amounts donated or contributed are eligible for deductions, with 100% of the donated sum qualifying. However, cash donations exceeding Rs 2,000 are ineligible for deduction under this section.
Documents required to prove donations for claiming tax exemption under section 80GGA
To claim deductions under section 80GGA, taxpayers must fulfil several conditions and provide specific documents as evidence of their donations. These documents serve as proof of the individual’s charitable contributions and include:
- Stamped receipts issued by the trust containing the registered name of the trust, the donor’s name, and the donation amount. These receipts must display the registration number provided by the income tax department, as it’s necessary for availing tax exemption.
- Documentation regarding the receipt of cheques or cash for the donation, ensuring its eligibility for tax exemption. Some banks also facilitate online donations along with tax receipts. Notably, donations made in kind do not qualify for any tax exemption.
- Cash donations exceeding Rs 2,000 are not permissible for deductions under section 80GGA. However, donations made through cheques, drafts, or online banking transfers are eligible for 100% exemption under this section.
Necessary certificate for claiming deduction under section 80GGA
The taxpayer must provide a certificate, known as Form 58A, from the payee as per rule 110 of the Income Tax Rules 1962. This certificate encompasses all details regarding the payments made by the taxpayer in the preceding year to any local authority, public sector company, or institution endorsed by the national committee for executing a scheme or project.
The certificate should be issued by the association and should confirm the following:
- The project involves the construction of structures, buildings, road laying, or well boring. These structures should serve purposes like schools, welfare centres, dispensaries, etc. Additionally, the installation of machinery or plants may be involved. All such work should have commenced before March 1, 1983.
- Any rural development program approved by the designated authority commenced before March 1, 1983.
In instances where the institution receiving the donation is engaged in personnel training, the certificate should include the following details:
- The association must have received approval from the authority before March 1, 1983.
- The training of individuals for rural development projects should have commenced at the institution before March 1, 1983.
Section 80GGA and New Tax Regime
Under the new tax regime, taxpayers must forgo several exemptions and deductions available under the old tax regime. Many deductions provided by Section 80 are no longer accessible to taxpayers who choose the new tax regime. One such example is the deduction under Section 80GGA. Consequently, taxpayers cannot claim a deduction under Section 80GGA if they opt for the new tax regime.
Difference between Section 80G and Section 80GGA
Here’s a comparison between Section 80G and Section 80GGA in tabular format:
| Aspect | Section 80G | Section 80GGA |
|---|---|---|
| Purpose | Provides deductions for donations made to specified funds and charitable institutions. | Offers deductions for contributions towards scientific research and rural development. |
| Eligible Recipients | Charitable trusts, specific funds, and institutions approved by the government. | Research associations, colleges, universities, institutions involved in scientific research, and government-approved rural development projects. |
| Deduction Limit | Deductions can be up to 100% or 50%, depending on the recipient and the nature of the donation. | Deductions are not specified as a percentage and can vary based on the nature of the contribution. |
| Nature of Donations | Donations can be in the form of cash, cheques, or drafts. | Contributions can include payments made for scientific research or rural development, but not donations in kind. |
| Mode of Payment | Donations can be made through cash, cheque, or draft. Cash donations above Rs 2,000 are not eligible for deduction. | Contributions can be made through cash, cheque, draft, or online banking transfers. Cash donations above Rs 2,000 are not allowed for deduction. |
| Certificate Requirement | It is not mandatory to furnish any specific certificate for claiming deductions. | It requires a Form 58A certificate from the payee detailing the nature of the project and its commencement date. |
| Applicability in the New Tax Regime | Deductions are available under both old and new tax regimes. | Deductions are not available for taxpayers who opt for the new tax regime. |
Final Words
In summary, Section 80GGA of the Income Tax Act incentivises contributions towards research and development initiatives in India, fostering innovation and societal progress. Eligible donations cover a range of activities, from scientific research to rural development projects. Taxpayers can avail deductions on these contributions, with 100% exemption possible, subject to documentation requirements. However, under the new tax regime, such deductions are unavailable.