Filing income tax returns (ITR) can be a complex process, but it also presents an opportunity to optimize your tax liability. One such avenue for tax deduction in India is through donations made to eligible charitable organizations and funds under Section 80G of the Income Tax Act. By leveraging this provision, taxpayers can contribute to worthy causes while simultaneously reducing their taxable income.
In this blog post, we will delve into the intricacies of claiming tax deductions on donations under 80G. We will guide you through the essential steps to ensure you maximize the benefits of your charitable contributions while staying compliant with the tax regulations.
What is Section 80G of the Income Tax Act?
Section 80G of the Income Tax Act in India is a provision that allows individuals and organizations to claim tax deductions on donations made to eligible charitable institutions and funds. It aims to incentivize philanthropy by providing tax benefits to individuals and entities that contribute towards charitable causes.
Under Section 80G, taxpayers can avail deductions from their taxable income for the amount donated to specific charitable organizations or funds. The deduction can be either 100% or 50% of the donated amount, depending on the nature of the receiving organization and the specific scheme or fund.
The Indian government has specified certain conditions and restrictions for donations to qualify for deductions under Section 80G. These conditions include registration of the recipient organization under Section 80G, compliance with prescribed guidelines, and adherence to the limits and restrictions set by the Income Tax Act.
The Process to Claim Tax Deduction on Donations (Under Section 80G)
To claim a tax deduction on donations under 80G of the Income Tax Act, you need to follow these steps:
Step 1: Ensure that the donations you have made are eligible for tax deduction under Section 80G. Not all donations qualify for deductions, so it’s important to check the list of eligible institutions and funds.
Step 2: When you donate, make sure to obtain a receipt from the receiving organization. The receipt should include details such as the name and address of the organization, your name and address, the donation amount, and the registration number of the organization under Section 80G.
Step 3: The deduction limit varies depending on the nature of the receiving organization. There are two categories:
- Donations with 100% deduction: Some donations qualify for a 100% deduction, meaning the entire donated amount can be claimed as a deduction from your taxable income. This includes donations made to specified funds, charitable institutions, or government schemes.
- Donations with 50% deduction: Certain donations allow for a deduction of 50% of the donated amount. This includes donations made to specified institutions and funds.
Step 4: Once you have determined the category of your donation, calculate the deduction amount accordingly. If it’s a 100% deduction, the entire donated amount can be claimed as a deduction. If it’s a 50% deduction, calculate 50% of the donated amount.
Step 5: When filing your income tax return (ITR), report the deduction under the relevant section. For individuals, this is typically Section 80G of the ITR form. Enter the donation amount and other required details in the appropriate section of the form.
Step 6: Keep the donation receipts and relevant documents with you as supporting evidence. The income tax department may ask for these documents for verification or audit purposes.
Who can Claim Tax Deductions under Section 80G?
Both individuals and entities in India can claim tax deductions under Section 80G of the Income Tax Act for donations made to eligible charitable institutions and funds. Here’s a breakdown of who can claim tax deductions:
- Individuals: Any individual, whether salaried or self-employed, who donates to an eligible charitable organization or fund can claim tax deductions under Section 80G. The individual’s donation will be deducted from their taxable income, reducing their overall tax liability.
- Hindu Undivided Families (HUFs): HUFs, which are joint family structures recognized under Hindu law, can also claim tax deductions on donations under 80G that are made to eligible charitable institutions. Similar to individuals, the donated amount will be deducted from the HUF’s taxable income.
- Companies: Companies, including domestic companies, multinational corporations, and public or private limited companies, can claim tax deductions under Section 80G for donations made to eligible charitable organizations or funds. The donated amount will be deducted from the company’s total income, reducing its taxable income.
How much Deduction is Allowed under Section 80G?
The deduction allowed under Section 80G of the Income Tax Act in India varies depending on the nature of the donation and the receiving organization. Here are the two categories of deductions:
Donations with 100% Deduction: Certain donations qualify for a 100% deduction, which means the entire donated amount can be claimed as a deduction from the taxpayer’s taxable income. Examples of donations that fall under this category include
- Donations to the National Defense Fund
- Donations to the Prime Minister’s National Relief Fund
- Donations to the National Foundation for Communal Harmony
- Donations to approved universities or educational institutions
Donations with a 50% Deduction: Some donations allow for a deduction of 50% of the donated amount. This means that only half of the donated amount can be claimed as a deduction from the taxpayer’s taxable income. Examples of donations that fall under this category include:
- Donations to certain charitable institutions or funds
- Donations to the Prime Minister’s Drought Relief Fund
- Donations to the Indira Gandhi Memorial Trust
Modes of Payment allowed Under Section 80G
Taxpayers can claim deductions under Section 80G for donations made through different modes such as-
- Cheques
- Demand Drafts
- Cash (for donations below Rs. 2,000).
However, it must be noted that in-kind contributions and donations above Rs. 2,000 made in cash do not qualify for Section 80G deduction. The deductions allowed under Section 80G can be up to 100% or 50% with or without restrictions, as specified in the section.
Proof to Claim an 80G Donation
The following points must be considered as proof to claim a deduction under 80G-
- To claim the deduction under Section 80G, keep the donation receipt and donation certificate (Form 10BE) readily available.
- Provide the details mentioned in the donation receipt and Form 10BE during the ITR filing process.
- Obtain Form 10BE from the institution or NGO that received your donation as concrete evidence for the deduction.
- Verify that the actual donation amount matches the information in Form 10BE before submitting your tax return.
- Request a revised and updated Form 10BE certificate from the institution if there is any discrepancy.
- Download Form 10BE from the income tax portal, as manually created forms are not valid.
- Look for the Income Tax Department logo and watermark on Form 10BE to ensure it is downloaded from the Income Tax Department’s e-filing portal.
80G Deduction Limits
Funds eligible for 100% deduction without qualifying limit
- Prime Minister’s National Relief Fund
- National Defence Fund set up by the Central Government
- 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 for 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)
Funds eligible for a 50% deduction without qualifying limit
Donations made to the Prime Minister’s Drought Relief Fund are eligible for a deduction of 50%.
Note- Before 2023-2024, the following three funds were also eligible for a 50% deduction without a qualifying limit-
- Jawaharlal Nehru Memorial Fund
- Indira Gandhi Memorial Trust
- Rajiv Gandhi Foundation
Funds eligible for a 100% deduction subject to 10% of adjusted gross total income
- Donations for promoting family planning to the government or approved local authority, institution, or association.
- Donations by a company to the Indian Olympic Association or any other notified association or institution in India for developing sports infrastructure or sponsoring sports and games in India.
Funds eligible for a 50% deduction subject to 10% of adjusted gross total income
- Any other fund or institution that meets the conditions stated in Section 80G(5).
- Government or local authority donations for charitable purposes other than promoting family planning.
- Donations to authorities in India dealing with housing, planning, development, or improvement of cities, towns, and villages.
- Donations to corporations under Section 10(26BB) for promoting the interests of the minority community.
- Donations for repairs or renovation of notified temples, mosques, gurudwaras, churches, or other places.
Check Out: Online Donate Money to Charity Projects
How to Claim a Donation Under 80G while Filing ITR?
To claim the deduction, the following details must be provided in your income tax return:
- Name of the donee
- PAN of the donee
- Address of the donee
- Amount of contribution (breakup in cash and another mode)
- Amount eligible for deduction
These details must be provided in each one of the following tables given in the ITR-
- Table A: Donations eligible for 100% deduction without qualifying limit
- Table B: Donations eligible for 50% deduction without qualifying limit
- Table C: Donations eligible for 100% deduction subject to qualifying limit
- Table D: Donations eligible for 50% deduction subject to qualifying limit
Calculating Donations Under 80G
Calculating the amount of deduction under 80G of the Income Tax Act in India depends on whether the donation falls under the 100% deduction category or the 50% deduction category. Here’s how you can calculate the deduction amount:
- If your donation qualifies for a 100% deduction, you can claim the entire donated amount as a deduction from your taxable income. For example, if you donate Rs. 10,000 to an eligible organization or fund with a 100% deduction, you can claim a deduction of Rs. 10,000 from your taxable income.
- If your donation falls under the 50% deduction category, you can claim 50% of the donated amount as a deduction from your taxable income. For example, if you donate Rs. 10,000 to an eligible organization or fund with a 50% deduction, you can claim a deduction of Rs. 5,000 (50% of Rs. 10,000) from your taxable income.
Latest Updates for Claiming Tax Deductions Under Budget 2023
Donations made to the following funds are not eligible for deductions under Section 80G-
- National Defense Fund
- Prime Minister’s National Relief Fund
- The National Foundation for Communal Harmony
- National/State Blood Transfusion Council
Donations to the following are eligible for a 50% deduction without any qualifying limit-
- Jawaharlal Nehru Memorial Fund
- Rajiv Gandhi Foundation
- Indira Gandhi Memorial Trust
- Prime Minister’s Drought Relief Fund
Conclusion
Filing income tax returns can be a complex process, but understanding the provisions that allow for tax deductions can help taxpayers optimize their tax liability. Section 80G of the Income Tax Act in India serves as a valuable tool for claiming tax deductions on donations made to eligible charitable organizations and funds. By following the necessary steps, individuals and entities can contribute to philanthropic causes while simultaneously reducing their taxable income.
Disclaimer: This blog is written to make it easy for readers to understand complicated processes. Some information and screenshots may be outdated as government processes can change anytime without notification. However, we try our best to keep or blogs updated and relevant.
