There is no escape from paying Income Tax if one is an earning Indian citizen, both Resident and NRI, as per rules and rates defined under the Income-tax Act, 1961. Almost 80% of revenues earned by the government through direct taxation come through Income Tax. The Government collects it as advance tax or self-assessment tax paid to the IT Department within stipulated tax payment dates of in a predefined calendar.
The rates for tax payment are determined and put into effect when the Finance Bill is passed in the Parliament post-presentation of Union Budget on 1st February every year. Not only are the rates defined, a slew of deductions and exemptions are also announced to incentivize the taxpayers to comply with tax provisions and also make handsome savings through prudent tax planning. Notwithstanding the popularity of deductions under sections 80C to 80E and some others like 24 and 10, Section 80G stands out, as its financial threshold is liberal and an avenue to donate for charity.
What is Section 80G?
Deductions under different sections of the Income Tax Act, 1961, are allowed for various purposes, which primarily reduces the tax liability of taxpayers. Among the popular sections of deduction to the salaried class of taxpayers are Section 80C and 80D up to Rs 1.5 Lakh and Rs 1 Lakh, respectively. That apart, there are Sections 24 and 80E providing deduction for Interest on Housing Loan for a limit of Rs 2 Lakh and without a threshold, respectively.
Even after exhausting the limits in the stated sections, there is ample scope of deductions in Section 80G, by donating for relief and charity to notified entities. This not only helps the taxpayer save money by reducing tax liability but also is a philanthropic act, revealing social consciousness for the well-being of deprived and poor fellow citizens in the country.
The donations are not confined to charity only, but also can help scientific research and study if funds are donated under specified Subsection of 80G. However, enough caution and discretion must be exercised to check if the body being donated to is eligible and duly notified by the Income Tax Department.
Who is Eligible to Donate under Section 80G?
Any taxpayer can make donations under Section 80G, be it individual, Hindu Undivided Family (HUF), Companies, and Partnership Firms. The donated sum can be claimed for deduction subject to limits set by the Government of India. Even NRIs are eligible for claim of deduction under Section 80G, provided the donations are made to eligible trusts or institutions.
Mode of Donations under Section 80G:
There are restrictions in the mode of payment of a donation to legitimize claim under Section 80G. The taxpayer can donate only through cash, cheque, or digital modes of transaction. Cash donations were limited to Rs.10000 earlier, but from the AY 2018-19 onwards, the maximum amount of cash donations was limited to Rs.2000 to prevent false and fraudulent claims. It must be importantly noted that claims are deemed valid only through the stated means and donations in kind like clothes, food, and rations are not entertained as legitimate claims.
Scope of Claiming Deduction under Section 80G:
There are well-defined criteria for claiming deduction under Section 80G, which needs to be adhered to without any deviation. Some of the major points to be considered are:
All donations must be paid through verifiable taxable or exempted income only. Donations made through non-taxable income do not qualify for the deduction
All donations must be in cash, cheque, or through electronic transfer mode, to be deemed valid
Companies are eligible for claiming deduction if donations have been made to the Indian Olympic Association
Donations made to registered and valid funds qualify for claiming suitable deductions under Section 80G. Such bodies need to be registered under Section 12A to be entitled to issue an 80G certificate.
Classification of Donation under Section 80G:
There are certain conditions which govern donations made to eligible Trusts and Charitable Institutions, to qualify for Income Tax deduction under Section 80G. All qualifying donations are broadly classified into four categories:
- Donations for 100% deduction (Without qualifying limit): As the terminology of the category indicates, these donations do not need meeting any qualifying limit. Examples are PM National Relief Fund (PMNRF), National Defence Fund (NDF), National Foundation for communal harmony, etc.
- Donations for 50% deduction (Without qualifying limit): These are donations directed to PM’s Drought Relief Fund, National Children’s Fund, etc., which qualify for 50% tax deduction of the donated amount.
- Donations for 100% deduction (Limited to 10% of Adjusted Gross Total Income): This category comprises of donations made to Government or Local Authorities to promote Family Planning, Indian Olympic Association, etc. Here, only 10% of the Adjusted Gross Total Annual Income qualifies for the deduction.
- Donations for 50% deduction (Limited to 10% of Adjusted Gross Total Income): This category comprises of donations made to Government or Local Authorities, which in turn promote charity are considered valid. Here, only 10% of the Adjusted Gross Total Annual Income qualifies for the deduction.
Quantum of Donations under Section 80G:
The above classification is indicative of the quantum of donation that qualifies for deduction under Section 80G. Thus, it can be summarized that to claim a deduction for either 100% or 50% of the sum donated, is further subject to “With” or “Without” any upper limit.
This is determined by the type of entity that receives the donation, which in other words, is referred to as Donee. Thus, it is imperative to choose the Donee with utmost care. Certain terminologies often come into play, with respect to donations under Section 80G, and need greater explanation. They are eligible Trusts or Charitable Institutions and Adjusted Gross Annual Income.
Eligible Trust or Charitable Entities
A body pursuing charitable causes like NGO must be registered under the Societies Registration Act, 1860 or under Section 25 of Companies Act, 1956. The source of income of these bodies must legitimate, and transactions need to be routed through permissible means with transparent account maintenance. They must further support only humanitarian causes without exclusively favouring any particular religious community or caste. The Income Tax Department notifies these bodies with specified limits, up to which deductions can be claimed through donations. The list is also updated periodically.
Adjusted Gross Total Income
It is defined as the sum of income under all heads forming the Gross Total Income. The Adjusted Income is arrived by reducing the aggregate of the following from Gross Total Income:
- The aggregate amount deductible under Sections 80C to 80U.except Section 80G
- Exempt Income
- Long Term Capital Gains (LTCG)
- Income with respect to Sections 115A, 115AB, 115AC, 115D, and 115AD for NRI and Foreign Companies
Exclusions under Section 80G:
In the case of Individuals, not all donations qualify for deduction under Section 80G. Thus, individuals' donations to Foreign Trusts and political parties are not considered valid claims under Section 80G.
List of Valid Donations under Section 80G:
Having understood the different aspects of donations, governing rules, and regulations, it is time to check up on the different entities and bodies that attract legitimate donations supporting claims under Section 80G.
Donations for 100% Deduction without Qualifying Limit:
|S. No.||Name of Bodies Receiving Donation|
|1||Central Government-sponsored National Defense Fund|
|2||PM’s National Relief Fund|
|3||An approved Educational Institution/ University of National Eminence|
|4||National Foundation for Communal Harmony|
|5||Fund set up by a State Government for the Medical Relief to the poor|
|6||Zila Saksharta Samiti under the Chairmanship of District Collector|
|7||National or State Council of Blood Transfusion|
|8||National Illness Assistance Fund|
|9||National Cultural Fund|
|10||National Trust for Welfare of Persons with Cerebral Palsy, Autism, Multiple Disabilities, and Mental Retardation|
|11||National Sports Fund|
|12||CM Relief Fund or Lt Gov’s Relief Fund of any State/Union Territory|
|13||Fund for Technology Development and Application|
|14||National Children’s fund|
|15||Andhra Pradesh CM’s Cyclone Relief Fund, 1996|
|16||The Indian Naval Benevolent Fund, Army Central Welfare Fund, or Air Force Central Welfare Fund|
|17||Any Trust/Fund/Institution to which Sec 80G (5C) applies to offer relief to victims of Gujarat earthquake|
|18||The Maharashtra CM Relief Fund|
|19||CM Earthquake Relief Fund|
|20||Gujarat State Government Fund for relief to victims of the Gujarat earthquake|
|21||Africa (Public Contributions – India) Fund|
|22||PM’s Armenia Earthquake Relief Fund|
|23||Clean Ganga Fund (From FY 2014-15)|
|24||Swachch Bharat Kosh (From FY 2014-15)|
|25||National Fund for control of drug abuse (From FY 2015-16)|
Donations for 50% Deduction Without Qualifying Limit:
|S. No.||Name of Bodies Receiving Donation|
|1||Jawaharlal Nehru Memorial Fund|
|2||Rajiv Gandhi Foundation|
|3||Indira Gandhi Memorial Trust|
|4||PM’s Drought Relief Fund|
Donations for 100% Deduction limited to 10% of Adjusted Gross Income:
|S.No||Name of Bodies Receiving Donation|
|1||Government or a Local Authority, Institution/Association that promotes Family Planning|
|2||Indian Olympic Association or other Association or Institution established for infrastructural development or sponsorship of games and Sports in India.|
Donations for 50% Deduction limited to 10% of Adjusted Gross Income:
|S. No.||Name of Bodies Receiving Donation|
|1||Any Fund or Institution that satisfies conditions as per Section 80G(5)|
|2||Government or Local Authority for any purpose apart from promoting family planning|
|3||An Indian authority involved/dealing with and taking care of housing, planning, development/improvement of towns, cities, villages or both|
|4||Any corporation referred to in Section 10(26BB) for promoting the interest of the minority community|
|5||Donations for renovations or repair of notified Mosque, Temple, Gurudwara, Church, and other places|
Subsections to Section 80G:
The ambit of donations is not confined to only Relief Funds, Charitable Trusts, and Institutions. Philanthropy and donations can be extended to other areas of interest for the general good of the country and society. Some of the relevant subsections of interest to taxpayers for claiming deduction in Income Tax are:
The promotion of scientific temper is enshrined in our constitution. Individuals who have a benevolent disposition towards the promotion of scientific research can donate under this subsection for appropriate deduction in Income Tax. Similarly, donations towards Rural Development are also included in this section, enabling deduction claims. The list of entities attracting donations in this section is tabulated below.
S. No. Name of Bodies Receiving Donation 1 Research Association, College, University or any other Institution which undertakes scientific research approved by the prescribed authority under Section 35(1)(ii) 2 Research Association, College, University or any other Institution which researches in Social Science or Statistical Research approved by the prescribed authority under Section 35(1)(iii) 3 Approved Association/Institution that undertakes Rural Development and is also approved under section 35CCA 4 Approved Association/Institution which undertakes training of persons for implementing programs of Rural Development 5 Public Sector Company, Local Authority or an approved Association/Institution that carries out schemes or projects approved under section 35AC. 6 Notified Rural Development Fund 7 Notified Fund for Afforestation 8 Notified National Poverty Eradication Fund
Donation under this Section is permitted only to individuals. Any Registered Political Party under Section 29A of Representation of Peoples Act, 1951, is eligible to receive a donation. Donations under this section are not restricted to any amount, but it has to be made in modes other than cash to be eligible for 100% tax deduction.
Unlike individuals in Section 80GGC, Indian Companies can donate under this section for claiming a legitimate Income Tax deduction. All rules applicable to individuals apply to this section also.
Documents Required for Deduction under Section 80G:
Detailed Section 80G deductions are entered in the E-filing portal of the Income Tax Department under a separate tab in the ITR Form. The entries needed to be input are:
- Name of the Donee
- PAN Card Number of the Donee
- Address of the Donee
- Amount of Donation
The following documents are needed for the completion of the claim for deduction under Section 80G:
Duly Stamped Receipt
It is mandatory to have a receipt from the Donee. Even digital receipt will serve the purpose. The receipt should compulsorily contain Donee details like name, address, PAN number, donated amount, and name of the donor.
It is essential if the taxpayer intends to claim a 100% deduction under Section 80G else the claim is liable to be denied.
Registration Number of the Trust
The Income Tax Department allows each eligible Donee Trust a Registration Number. The Donor should check if this number is present in the receipt. Additionally, this Registration Number must be valid on the date of donation, failing which the claim is liable to be denied.
It is heartening to note that more and more Indians are becoming socially conscious and are contributing to the growth of philanthropic organizations that act in the field of rural uplift as well as support marginalized citizens of the country. In a way, it inspires and nurtures poverty alleviation projects, education, healthcare, and nutrition campaigns by supporting the Charitable Trusts and NGOs involved in this filed. Scientific research and Rural Development, in general, are other areas that are boosted through donations. Relief Funds help out the distress in a time of natural calamities and/ or man-made disasters. Apart from the substantial tax rebates earned by the donor through Section 80G, it is a source of immense satisfaction for having made a difference.
Ans: Individuals, Firms, LLPs, Partnerships, and Companies can donate and claim deduction under this section while filing ITR.
Ans: Contribution to a foreign trust is ineligible for deduction under this section.
Q: Which is the sub-section under which an individual can contribute to a political party and seek deduction?Ans: Under Section 80GGC, you can contribute to a political party and seek deduction.
Ans: Yes, NRIs also can claim deduction under Section 80G, provided the donation has been made to eligible entities.
Ans: It is restricted to a maximum of Rs 2000 effective from FY 2017-18.
Ans: Yes, the employee can claim the deduction, provided the employer certifies that the donation is made from the employee’s salary.
Q: Is it mandatory for the Donee organization to be notified by the Income-tax Department to be eligible for receiving donations for a valid deduction?Ans: Yes, it is mandatory; else, the claim is liable to be rejected.
Ans: All donations must be in cash, cheque, or electronic transfer modes to be eligible for deduction.
Ans: While an individual can donate to a registered political party under Section 80GGC and claim the deduction, any Indian company can donate to the registered political party and claim deduction under Section 80GGB.
Q: What is Section 80G under the New Income Tax Slabs announced by the Government with effect from FY 2020-21 onwards?Ans: In the new Income Tax Slab rates announced in the Union Budget in February 2020, applicable for FY 2020-21, deduction under Section 80G has been removed, along with most deductions and exemptions. However, it is optional, and taxpayers may remain with the Old Tax Slab Rate and continue to enjoy deductions, including under Section 80G.