One of the best ways to save money on tax while also doing your bit to contribute to the world is by making donations towards charities that will then give you deductions under Section 80G. These have to be trusts or institutions that are eligible.
Section 80G of the Income Tax Act primarily deals with donations made towards charity, with an aim to provide tax incentives to individuals indulging in philanthropic activities. This section offers tax deductions on donations made to certain funds or charities. An amount donated by an individual to an eligible charity can be claimed as a tax deduction while filing of an income tax return.
Section 80G Eligibility
All taxpayers (individuals/companies/Hindu Undivided Families) are eligible to make donations to charity under Section 80G and claim a deduction, subject to limits set down by the government. NRIs are also entitled to the benefits under Section 80G, provided their donations are to eligible trusts or institutions.
Donations Permitted under Section 80G
Individuals who wish to claim deductions under section 80G need to ensure that the organization they are donating to falls under the purview of this Act. Only those donations made to registered and valid funds or charitable institutions qualify for suitable deductions. Trusts and charities need to be registered under Section 12A post which they qualify for the 80G certificate. Individuals are advised to check the credentials of an organization before donating to it.
Exemptions under Section 80G
Not all donations made by an individual qualify for deductions under Section 80G. Donations made to foreign trusts and political parties are not covered under the ambit of this section and individuals cannot claim tax deductions for such donations.
Deduction under Section 80G
Donations paid towards eligible trusts/charities which qualify for tax deductions are subject to certain conditions. Donations under Section 80G can be broadly classified under four categories, as mentioned below.
- Donations with 100% deduction (Without any qualifying limit): Donations made under this category enjoy 100% tax deduction and are not subject to any qualification limit being met. Donations to the National Defense Fund, Prime Minister’s National Relief Fund, The National Foundation for Communal Harmony, National/State Blood Transfusion Council, etc. qualify for such deductions.
- Donations with 50% Deduction (Without any qualifying limit): Donations made towards trusts like Prime Minister’s Drought Relief Fund, National Children’s Fund, Indira Gandhi Memorial Fund, etc. qualify for 50% tax deduction on donated amount.
- Donations with 100% deduction (Subjected to 10% of adjusted gross total income): Donations made to local authorities or government to promote family planning and donations to Indian Olympic Association qualify for deductions under this category. In such cases, only 10% of the donor’s Adjusted Gross Total Income is eligible for deductions. Donations which exceed this amount are rounded off to 10%.
- Donations with 50% deduction (Subjected to 10% of adjusted gross total income): Donations made to any local authority or the government which would then use it for any charitable purpose qualify for deductions under this category. In such cases, only 10% of the donor’s Adjusted Gross Total Income are eligible for deductions. Donations which exceed this amount are capped at 10%.
Scope of Deduction:
There are certain basic criteria which must be met for a donation to be valid under Section 80G. Some of the major points are mentioned below.
- Donations should be paid through taxable or exempted income only. Donations made through other non-taxable income sources do not qualify for deduction.
- Only those donations which are paid in cash or cheque are eligible, with donations made in the form of clothes, food, medicines, etc. not eligible under Section 80G.
- Only companies are eligible for deductions when it comes to donations made to the Indian Olympic Association.
- Only those donations made to valid and registered trusts qualify for deductions.
- Donation made to foreign institutions and political parties are exempt from deductions.
Documents Required to Claim Deduction under Section 80G
Individuals wishing to claim deduction under Section 80G need to have the following documents to support their claim.
1. Duly Stamped Receipt: It is mandatory to have a receipt issued by the trust/charity which receives a donation. This receipt should include details like the name, address and PAN number of the trust, amount donated and the name of donor.
2. Form 58: Form 58 is essential if a donor intends to claim 100% deduction on a donation, without which their donation will not be eligible for 100% deduction.
3. Registration Number of Trust: Each eligible trust is provided with a registration number by the Income Tax Department and donors should ensure their receipt contains this number. This registration number needs to be valid on the date of a particular donation, failing which a donation might be in eligible for deductions.
Mode of Payment for Donations under Section 80G
An individual can claim deductions against donations made under Section 80G. The payment for the donations can be made in cash or through cheque and drafts. However, one needs to keep a few things in mind in this regard:
1. From FY 2017-18, cash donations exceeding the mark of Rs.2,000 will not qualify for the deduction.
2. Donations made in kind (food, medicines, clothes, etc.) will not qualify for the deduction.
3. To be able to claim deductions under Section 80G, donations of more than Rs.2,000 have to made to be made in any mode other than cash.
4. The donations will either be eligible for a deduction of 50% or 100% (with or without restriction), as per the rules prescribed under Section 80G.
Donations which are eligible for 100% Deduction without any qualifying limit
- Prime Minister’s National Relief Fund
- National Sports Fund
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory.
- An approved university/educational institution of National eminence
- National Foundation for Communal Harmony
- National Illness Assistance Fund
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- 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
- 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) or
- Africa (Public Contributions – India) Fund
- Swachh Bharat Kosh (applicable from FY 2014-15)
- The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6, 1993
- Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
- Fund for Technology Development and Application
- National Children’s Fund
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- National Fund for Control of Drug Abuse (applicable from FY 2015-16)
- Fund set up by a State Government for the medical relief to the poor
- National Blood Transfusion Council or to any State Blood Transfusion Council
- Clean Ganga Fund (applicable from FY 2014-15)
- National Cultural Fund
- National Defense Fund set up by the Central Government
- Prime Minister’s Armenia Earthquake Relief Fund
- Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
Donations which are eligible for 50% Deduction without any qualifying limit
- Jawaharlal Nehru Memorial Fund
- Rajiv Gandhi Foundation
- Indira Gandhi Memorial Trust
- Prime Minister’s Drought Relief Fund
FAQs on Section80G
1. Can I donate to the Prime Minister’s Relief Fund and claim deduction under Section 80G while being a non-resident Indian?
Yes, you can claim deductions under Section 80G as it is applicable to both resident and non-resident Indians.
2. I am a partner in a partnership firm and I want to claim deductions under Section 80G. Is the firm eligible for the same?
Yes, as per the terms of Section 80G, partnership firms are eligible to claim deductions against donations made by them.
3. I made a donation worth Rs.20,000 in cash to a trust that is qualified for deduction under Section 80G0. Will I be eligible to claim the deduction against it?
No, cash donations of up to Rs.2,000 are eligible for deductions under Section 80G. Any amount exceeding the mark of Rs.2,000 will not be eligible for the deduction.