Section 80G deduction for Donation

Section 80G of the Income Tax Act is a boon for individuals and businesses looking to contribute to social welfare while reducing their tax liability. This section incentivizes donations made to eligible charitable institutions and funds by offering tax deductions. In this blog, we’ll explore the essentials of Section 80G, including its benefits, eligibility, and how to claim deductions effectively. 

What is Section 80G?

Section 80G allows taxpayers to claim deductions on donations made to specific organizations, promoting philanthropy and social responsibility. These deductions are available to individuals, Hindu Undivided Families (HUFs), companies, and other taxpayers, regardless of their income levels.

List of Donations Eligible for 100% Deduction without Qualifying Limit

• National Defence Fund set up by the Central Government
• Prime Minister’s National Relief Fund
• National Foundation for Communal Harmony
• An approved university/educational institution of National eminence
• Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
• Fund set up by a state government for medical relief to the poor
• National Illness Assistance Fund
• National Blood Transfusion Council or any State Blood Transfusion Council
• National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
• National Sports Fund
• National Cultural Fund
• Fund for Technology Development and Application
• National Children’s Fund
• Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
• 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
• The Maharashtra Chief Minister’s Relief Fund during October 1, 1993, and October 6, 1993
• Chief Minister’s Earthquake Relief Fund, Maharashtra
• Any fund set up by the State Government of Gujarat exclusively for providing relief to the victims of the earthquake in Gujarat
• 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)
• Prime Minister’s Armenia Earthquake Relief Fund
• Africa (Public Contributions – India) Fund
• Swachh Bharat Kosh (applicable from FY 2014-15)
• Clean Ganga Fund (applicable from FY 2014-15)
• National Fund for Control of Drug Abuse (applicable from FY 2015-16)

List of Donations Eligible for 50% Deduction without Qualifying Limit

• Prime Minister’s Drought Relief Fund
• Jawaharlal Nehru Memorial Fund*
• Indira Gandhi Memorial Trust*
• Rajiv Gandhi Foundation*

*Donations to these funds are not eligible for deduction from FY 2023-24 onwards.

List of Donations Eligible for 100% Deduction Subject to 10% of Adjusted Gross Total Income

• Donations to the government or any approved local authority, institution or association to be utilised to promote family planning
• Donation by a company to the Indian Olympic Association or any other notified association or institution established in India to develop infrastructure for sports and games in India or sponsor sports and games in India.

List of Donations Eligible for 50% Deduction Subject to 10% of Adjusted Gross Total Income

• Any other fund or institution satisfies the conditions mentioned in Section 80G(5).
• Government or any local authority, to be utilised for any charitable purpose other than promoting family planning.
• Any authority constituted in India to deal with and satisfy the need for housing accommodation or the purpose of planning, development or improvement of cities, towns, villages or both.
• Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community.
• For repairs or renovation of any notified temple, mosque, gurudwara, church, or other places.

Eligibility for Deduction Under Section 80G

To claim tax deductions under Section 80G, the following eligibility criteria must be met:

1. Eligible Taxpayers:

   • Individuals, Hindu Undivided Families (HUFs), companies, firms, and any other person liable to pay taxes can claim this deduction.

2. Eligible Donations:

   • Donations must be made to funds or institutions registered and recognized under Section 80G.

3. Mode of Donation:

   • Donations should be made in cash, cheque, or digital modes.
   • Note: Cash donations exceeding ₹2,000 are not eligible for tax deductions.

4. Receipts and Documentation:

   • A valid donation receipt with details like the organization’s name, PAN, amount donated, and their 80G registration number is mandatory for claiming the deduction.

5. Non-Monetary Contributions:

   • Only monetary donations are eligible; contributions in kind (e.g., clothes, food, or material goods) do not qualify.

Documents Required to Claim Deductions Under Section 80G

To claim tax deductions for donations under Section 80G, the following documents are necessary:

1. Donation Receipt:

   • A receipt issued by the charitable institution or fund is mandatory. It should include:
     • Name and address of the organization.
     • PAN of the organization.
     • Donation amount (clearly specified).
     • Registration number under Section 80G.
   • Ensure the receipt is dated and signed by the authorized person.

2. 80G Certificate:

   • Some organizations provide a separate 80G certificate to confirm their eligibility for deductions. This certificate validates that the organization is registered under Section 80G of the Income Tax Act.

3. Mode of Payment Proof:

   • Copies of bank statements, cheques, or online transaction receipts as evidence of the donation.
   • For cash donations, ensure the amount is ₹2,000 or less to qualify for deductions.

How to Claim Deductions Under Section 80G

1. Documentary Evidence
   Obtain a receipt from the charitable organization. The receipt must include:

   • Name and address of the trust/organization
   • PAN of the organization
   • Donation amount
   • Registration number under Section 80G

2. Filing Your Tax Return
   While filing your Income Tax Return (ITR), mention the donation details under the “80G” section. Ensure that the details match the receipts.

How to Calculate Adjusted Gross Total Income (AGTI) for Section 80G

Adjusted Gross Total Income (AGTI) is the basis for determining the deduction limits under Section 80G for donations with restrictions. Here’s how you can calculate it:

1. Start with Gross Total Income (GTI):
   Calculate your total income from all sources, including:

   • Salary
   • House property
   • Business or profession
   • Capital gains
   • Other sources (e.g., interest, dividends)

2. Subtract Exempt Income:
   Deduct income that is exempt under the Income Tax Act, such as:

   • Agricultural income (up to the specified limit).
   • Interest on tax-free bonds.
   • Income from certain allowances like HRA (subject to conditions).

3. Subtract Long-Term Capital Gains (LTCG):
   Deduct long-term capital gains that are taxed at special rates and are not part of normal taxable income.

4. Subtract Deductions Under Sections 80C to 80U:
   Remove deductions claimed under other sections of Chapter VI-A (excluding Section 80G), such as 80C, 80D, 80TTA, etc

5. Exclude Specific Incomes (if applicable):

   • Any income taxed at special rates or considered separately under the Income Tax Act, such as winnings from lotteries

Formula for AGTI

AGTI = Gross Total Income (GTI) – Exempt Income – LTCG – Deductions (except 80G)

Example

• Gross Total Income: ₹10,00,000
• Exempt Income: ₹50,000
• Long-Term Capital Gains: ₹1,00,000
• Deductions under Sections 80C to 80U: ₹1,50,000

AGTI Calculation:

1. GTI = ₹10,00,000
2. Exempt Income = ₹50,000
3. LTCG = ₹1,00,000
4. Other Deductions = ₹1,50,000

AGTI = ₹10,00,000 – ₹50,000 – ₹1,00,000 – ₹1,50,000 = ₹7,00,000

For donations with limits under Section 80G, the maximum deduction is capped at 10% of AGTI, i.e., ₹70,000 in this case.