Do you want to save tax while making a positive difference in the world? If yes, you should know about section 80G of the Income Tax Act, 1961. This section allows you to claim deductions for your donations to various charitable institutions approved by the government. By donating to these institutions, you can support their noble causes, reduce your taxable income, and pay less tax.
Sounds good, right? But before you start writing cheques or transferring money online, you must understand some crucial aspects of section 80G deduction. In this article, we will tell you everything you need to know about 80G and how to reduce your tax liability using this fantastic tool.
What is 80G?
Section 80G is a magic formula that lets you turn your generosity into tax savings. It is a section of the Income Tax Act of 1961 that allows you to claim deductions for your donations to various charitable institutions approved by the government.
By donating to these institutions, you can help them in their noble causes, reduce your taxable income, and pay less tax. It is like getting a reward for being kind and compassionate. Section 80G is a win-win situation for you and society.
How to Claim Tax Exemption Under 80G?
Before being generous, learn the ins and outs of the 80 tax exemptions and how to get the most out of them.
Who Can Claim 80G tax exemption?
If you fall into one of the following categories, you are eligible to claim an 80G tax exemption on your donations:
- Individual
- Company (Proprietorship/Partnership/LLPs)
- NRI
- Firm
- Hindu Undivided Family (HUF)
- Any other person
Payment Modes for Donations under 80G
Acceptable modes of payment include-
- Stamped Cash receipt (for amounts up to Rs. 2000/-)
- Cheque
- Draft
Remember that other payment modes, such as food, clothing, medicines etc., are not eligible for an 80G tax deduction.
Documents Required to Claim 80G Deduction
To claim an 80G deduction, you need to have the following documents:
- A valid receipt from the trust/charitable institution you donated to. The receipt should mention the name, address, PAN, registration number, amount and mode of donation of the institution. It should also have the seal and signature of the authorized person of the institution.
- A copy of the registration certificate of the institution that shows its eligibility under section 80G. You can also check the website of the Income Tax Department for the list of eligible institutions.
- proof of your identity and income, such as a PAN card, Aadhaar card, salary slip, bank statement etc.
- You must necessarily submit form 58 received from donee along with your ITR if you wish to claim a 100% tax rebate on your donation. Otherwise, your contribution will be deemed eligible for a 50% deduction only.
Scope of deductions under Section 80G
- Donations made with taxable income are only eligible for a rebate. Any contributions made with non-taxable income will not be eligible for the 80G deduction.
- Any contribution made towards the following funds will not qualify for 80G deductions from the assessment year 2024-25 and subsequent assessment years. –
- National Defense Fund
- Prime Minister’s National Relief Fund
- The National Foundation for Communal Harmony
- National/State Blood Transfusion Council
- Only donations made for charity purposes are considered for an 80 G deduction. No donations made for commercial or personal benefits are covered.
- Donations made to political parties or foreign institutions are eligible for consideration of tax rebates.
Challenges of Section 80G
Some of the challenges of Section 80G you should be aware of –
- Keeping track of all the donations and receipts throughout the year
- Verifying the eligibility and authenticity of the charitable institutions before making a donation
- Ensuring that the donation is made in cash or cheque only, as other modes of payment are not eligible for deduction
- Checking the category and limit of the deduction for each institution, as different institutions have different deduction percentages and limits
- Providing the details of the donations in the ITR form and attaching the receipts along with it
Types of deductions under 80G tax exemption
100% tax-deductible donations with no qualifying limit
Donations within this category include-
| National Defence Fund set up by the Central Government (only up to FY 22-23) |
| Prime Minister’s National Relief Fund (only up to FY 22-23) |
| National Foundation for Communal Harmony (only up to FY 22-23) |
| Approved University or educational institution |
| Zila Saksharta Samiti |
| State-created fund for poor populations’ medical expenses. |
| National Illness Assistance Fund |
| National or State Blood Transfusion Council (only up to FY 22-23) |
| National Sports Fund |
| National Cultural Fund |
| Fund for Technology Development and Application |
| National Children’s Fund |
| CM’s Relief Fund |
| Lieutenant Governor’s Relief Fund |
| Andhra Pradesh Chief Minister’s Cyclone Relief Fund, Army Central Welfare Fund, Indian Naval Benevolent Fund, Air Force Central Welfare Fund, and the Maharashtra Chief Minister’s Relief Fund |
| Chief Minister’s Earthquake Relief Fund, Maharashtra |
| Contribution towards relief to Gujarat earthquake victims |
| Swachh Bharat Kosh |
| Clean Ganga Fund |
| Contribution to the National Fund for Drug Addiction Control |
50% tax-deductible donations with no qualifying limit
Donations within this category include-
| Jawaharlal Nehru Memorial Fund |
| Prime Minister’s Drought Relief Fund |
| National Children’s Fund (only up to FY 22-23) |
| Indira Gandhi Memorial Trust (only up to FY 22-23) |
| Rajiv Gandhi Foundation (only up to FY 22-23) |
3.100% tax-deductible with a limit of 10% of the adjusted gross total income
Donations within this category include-
| Donations to the government /any approved local authority/ institution/association to promote family planning. |
| Corporate donations to the Indian Olympic Association/ other notified associations for the development of infrastructure or sponsorship for sports and games in India. |
| Donations made in the previous year for renovation or repair of any temple, mosque, gurudwara, church/or other well-known place of public worship. |
50% tax-deductible with a limit of 10% of the adjusted gross total income
Donations within this category include-
| Donations to any local authority or government for any charitable purpose except family planning. |
| Donations to any authority in India to deal with and meet the need for housing accommodation or development or both. |
| Donations to any corporation referred to in section 10(26BB) for promoting the interests of the minority community. |
| Donations to any temple, mosque, gurudwara, church, or other places of worship for repairs or renovation. |
What is Adjusted Gross Total Income?
Adjusted Gross Total Income is the amount of income that is left after deducting certain items, as detailed below from the Gross Total Income from all heads. Permissible deductions include-
- Amount deductible under Sections 80C to 80U excluding 80G
- Non-taxable income
- Long-term capital gains
- Short-term capital gains
- Income relating to NRIs and foreign companies (referred to in Sections 115A, 115AB, 115AC, 115AD and 115D)
Key Takeaways
Section 80G of the Income Tax Act, 1961 is a beneficial provision that allows you to claim deductions for your donations to eligible charitable institutions. By donating to these institutions, you can support various social and environmental causes and save tax by reducing your taxable income.
However, to claim this deduction, you need to follow certain rules and conditions, such as providing the details of your donations in your ITR form, having a valid receipt from the institution, and making the donation in cash or cheque only.
You also need to check the category and eligibility of the institution before donating, as different institutions have different deduction percentages and limits. By following these guidelines, you can make the most of the section 80G deduction and enjoy the dual benefits of charity and tax saving.
Be generous and smart with your tax planning.
FAQs
Can a partnership firm claim an 80G exemption for the donations made?
Yes, a partnership firm can claim an 80G deduction for donations made during the fiscal year. The partnership firm must obtain a receipt from the designated trust for the donation made to submit it to IT authorities. The receipt must include the trust’s name, address, and registration number, as well as the amount and mode of donation.
How to find out which institution is covered under section 80G before donating?
One method is to look up the trust’s information in the list of eligible institutions on the Income Tax Department’s website. You can use the searchable database to find out every detail needed to claim the 80 G tax exemption, such as your PAN number, address, registration number, and category. You can also see if it falls into the exempted category. Alternatively, you can request these details from the organization to which you wish to donate.
What is Form 58?
Form 58 is the certificate issued by the eligible trust with details such as the name and address of the donor and the donee, the amount and mode of donation, the registration number and validity of the donee, and the signature and seal of the authorized person of the donee.