Most of the tax payers are not much familiar with Section 80G of Income Tax Act. There are two aspects one you are helping the needy poor people and at the same time your tax liability will be reduced to the extent of amount you donated (in some cases). Section 80G of the Income Tax Act offers a tax deduction for donations to certain prescribed funds and charitable institutions. Any person or 'assessee' who makes an eligible donation is entitled to get tax deductions subject to certain conditions. This section does not restrict the deduction to individuals, companies or any specific category of taxpayer. The extent of deduction is either 50% or 100% of the contribution, depending on the charitable institution donated to. Donations to certain institutions, the aggregate deduction is limited to 10% of the "Adjusted Gross Total Income". So, in such cases, even if you do make a donation larger than 10% of your Adjusted Gross Total Income, the donation amount eligible for claiming a deduction would be capped at 10% of the Adjusted Gross Total Income. The Adjusted Gross Total in this case, is the gross total income minus long-term capital gain, short term capital gain and all deductions u/s 80C to 80U except any deduction under this section.
Only donation made to prescribed funds and institutions qualify for deduction: All donations are not eligible for tax benefits. Tax benefits can be claimed only on specific donations i.e. those made to prescribed funds and institutions.
The donation may be paid either out of taxable or exempted income.
Only donations made in cash or cheque are eligible for deductions Donations in kind do not entitle for any tax benefits. For example, during natural disasters such as floods, earthquake, and many organizations start campaigns for collecting clothes, blankets, food etc. Such donations will not fetch you any tax benefits.
a) Donation to Foreign Trust - Donations made to foreign trusts do not qualify for deduction under this section.
b) Donation to Political Parties – the assessee cannot claim deduction for donations made to political parties for any reason, including paying for brochures, souvenirs or pamphlets brought out by such parties.
c) For donations made to Indian Olympic Association, any association notified u/s 10(23) for development of infrastructure for sports or games, or for sponsorship of sports or games, only a company is eligible for deduction.
d) Donations made to not all charitable institutions qualify for a deduction. Here is a list of approved charitable institutions and funds that qualify for a deduction.
e) Donation made by NRI: - NRIs are also entitled to claim tax benefits against donations, subject to the donations being made to eligible institutions and funds
Donations with 100% deduction without any qualifying limit:
Prime Minister's National Relief Fund
National Defence Fund
1. Prime Minister's Armenia Earthquake Relief Fund
2. The National Foundation for Communal Harmony
3. Approved university or educational institution of national eminence
4. The Chief Minister's Earthquake Relief Fund, Maharashtra
5. Donations made to Zila Saksharta Samitis.
6. The National Blood Transfusion Council or a State Blood Transfusion Council.
7. The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
Donations with 50% deduction without any qualifying limit.
- Jawaharlal Nehru Memorial Fund
- Prime Minister's Drought Relief Fund
- National Children's Fund
- Indira Gandhi Memorial Trust
- The Rajiv Gandhi Foundation
Donations to the following are eligible for 100% deduction subject to 10% of adjusted gross total income
- Donations to the Government or a local authority for the purpose of promoting family planning.
- Sums paid by a company to Indian Olympic Association
Donations to the following are eligible for 50% deduction subject to 10% of adjusted gross total income
- Donation to the Government or any local authority to be utilized by them for any charitable purposes other than the purpose of promoting family planning.
In order to claim deduction, it is mandatory for the donor to furnish a proof of payment towards the eligible fund or institution. A stamped receipt is issued by the recipient trust in this regard, which must be attached by the assessee along with the income tax returns.
The receipt must include the following details.
- Name and address of the trust
- The name of the donor
- The amount donated, mentioned in words and figures
- The registration number of the trust, as given by the income tax department under section 80G, along with its validity period.
Tax benefits cannot be claimed without the above mentioned details and document.
Donations deducted from salary - Employees can claim deduction u/s 80G provided a certificate from the Employer is received in which employer states the fact that The Contribution was made out from employee's salary account . .
There are many trusts in India engaged in charitable activities. In order to ensure that only contributions to genuine trusts entail a tax benefit, the government has brought in registration of trusts. Thus, before you donate, check to see, if the trust you are donating to is registered and has the tax exemption certificate, which is popularly known as the 80G certificate.
For list of Institution donation to whom is eligible to 100% deduction without any qualifying limit, eligible to 50% deduction without any qualifying limit, 100% & Subject to qualifying limit and of those eligible for 50% deduction subject to qualifying limit please check the link given below
Note: Tax Provision and deduction limits, eligible institutions related to donations u/s 80G is subject to change. The purpose of this article is just to give an idea about this section. Please contact your tax consultant or Chartered Accountant for more details and guidance. Errors and omissions are expected.
Best Regards
Prakash Nair B.com, LLB, CAIIB, CA(Inter), DMFM, NCFM,CME-1
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