In the Indian Income Tax Act, Sections 80G and 80GGA offer taxpayers opportunities to save on taxes while supporting charitable causes, research, and rural development. By contributing to eligible institutions and initiatives, individuals and firms can claim deductions ranging from 50% to 100% of the donated amount. In this guide, we will explore the essential aspects of both sections and their impact on tax savings.
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Difference Between Section 80G and 80GGA
Section 80G and 80GGA encourage contributions to charitable and developmental causes by providing tax-saving benefits to individuals and entities. Tabulated below are a few differences between the two.
|Purpose of Deduction
|For donations to charitable institutions or funds
|For donations towards rural development and scientific research
|Donations to authorised charitable funds
|Donations made for rural development and scientific research
|All taxpayers, including individuals, LLPs, partnerships, companies, and firms
|All taxpayers, except those with income from business or a profession
|Promote humanitarianism and charitable giving
|Stimulate contributions towards critical areas of rural and scientific advancements
Let’s Understand Section 80G
Section 80G in India pertains to income tax deductions for donations made to specified charitable institutions. Donors can claim deductions for contributions towards various causes, such as social, cultural, scientific, and rural development. The section aims to encourage philanthropy by providing financial incentives for supporting approved charitable organizations.
Donations Eligible for Deductions with No Qualifying Limit (80G)
Donations Eligible for 100% Deductions with No Qualifying Limit
- National Children’s Fund
- National Cultural Fund
- National Sports Fund
- National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation, and Multiple Disabilities
- Fund for Technology Development and Application
- National Illness Assistance Fund
- Approved University/Educational Institute of National eminence
- National Fund for Control of Drug Abuse
- Swachh Bharat Kosh
- Clean Ganga Fund
- Zila Saksharta Samiti formed in each district with the district collector as its chairman
- Fund established by a state government for medical relief to the impoverished
- Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund concerning any state or union territory
- The Army Central Welfare Fund or the Air Force Central Welfare Fund or the Indian Naval Benevolent Fund
- Andhra Pradesh Chief Minister’s Cyclone Relief Fund 1996
- Chief Minister’s Earthquake Relief Fund for the State of Maharashtra
- Any fund established solely by the Gujarat state government to offer assistance to the Gujarat earthquake victims
- Any trust, organisation, or fund eligible for Section 80G can contribute to aid the victims of the Gujarat earthquake. (Contributions made between 26 January 2001 and 30 September 2001)
- Prime Minister’s Armenia Earthquake Relief Fund
- Africa India Public Contributions Fund
Donations Eligible for 50% Deductions with No Qualifying Limit
- Prime Minister’s Drought Relief Fund
Note: According to the Finance Act of 2023, Jawaharlal Nehru Memorial Fund, Rajiv Gandhi Foundation and Indira Gandhi Memorial Trust no longer stand eligible for deductions under Section 80G. Thus, donations made after 1st March 2023 will not qualify for deductions.
Donations Qualifying for Deductions Under Section 80G (With 10% Adjusted Gross Income)
|Donations Qualifying for 100% Deductions
|Donations Qualifying for 50% Deductions
|Donations provided to the government or any endorsed local authority, association, or institution to promote family planning
|Any fund or institution that fulfils the conditions mentioned under Section 80G(5) of the Act
|A company’s contribution to the Indian Olympic Association or any other officially recognised association or institution established in India aimed at enhancing sports infrastructure or sponsoring sports and games in the country
|Any authority established in India to plan, develop, or improve towns, cities, villages, or to address the need for housing accommodation
|Repairs or renovations to any recognised temple, gurudwara, mosque, church, or other religious locations
|Any corporation mentioned in Section 10 (26BB) that promotes minority community interests
|Intended for charitable purposes other than promoting family planning by the government or any local authority
Who is Eligible to Claim Deductions Under Section 80G?
- Hindu Undivided Firm (HUF)
- Non-Resident Indian (NRI)
- Any other person
Note: These deductions are not available if you opt for the new tax regime.
Documents to Claim the Deduction Under Section 80G
To avail of deduction under Section 80G specific documents are essential to serve as evidence for the donations made.
- A detailed list of the donated amounts and the registered name of the trust or organisation
- The income tax assessee’s name, along with the registration number provided by the IT Department
- Vital details like the organisation’s name, its official stamp, date of donation, and PAN (Permanent Account Number)
Note: Form 58, mandatory to claim 100% exemptions without limits, must be obtained from the receiving organisation
You need to fill these details in the respective tables given in the ITR.
- Table A: 100% deduction without qualifying limit
- Table B: 50% deduction without qualifying limit
- Table C: 100% deduction subject to qualifying limit
- Table D: 50% deduction subject to the qualifying limit
Details on Modes of Payment Under Section 80G
Taxpayers can donate using the following modes of payment:
- Demand draft
Note: Cash donations exceeding ₹2000 are not eligible for an 80G deduction. Also, the entire amount contributed or donated is considered eligible for tax deduction under both sections.
How to Claim a Deduction under Section 80G?
To claim the deduction under Section 80G of the Income Tax Act, follow these steps:
- Calculate your total gross income: Add up all your income from various sources, such as salary, dividends, capital gains, interest, rental income, etc.
- Determine the eligible donation amount: Identify the donations you made to eligible institutions under Section 80G. Remember, the deduction can range from 50% to 100% of the donated amount, depending on the institution.
- Check if there is a qualifying limit: For some donations, there might be a qualifying limit, and the deduction is limited to 10% of your adjusted gross total income.
- Fill out ‘Schedule 80G’ in the ITR form: Provide details of your donations in the appropriate tables (A, B, C, D) based on the type of charitable institution you donated to. (these tables are present in the ITR form)
- ARN disclosure (if applicable): If you donated to institutions that allow a 50% deduction subject to a qualifying limit, disclose the ARN (donation reference number) in the ‘Table D’ of the ITR form.
- Mention the deduction amount separately (ITR forms 2 and 3): If you are using ITR forms 2 or 3, make sure to mention the total deduction amount claimed under Section 80G separately.
- Properly document your donations: Keep all the necessary documents, like donation receipts, certificates, and ARN details (if applicable), for verification purposes.
- File your ITR with the relevant details: Ensure you accurately enter the donation details and complete the rest of the ITR form correctly.
Let’s Understand Section 80GGA
Deductions for contributions to scientific research or rural development are permitted under Section 80GGA. This deduction is applicable to all taxpayers, excluding those with income (or loss) from business and/or a profession.
Donations Eligible under Section 80GGA
- As approved under Section 35(1)(ii), contributions to research institutions, colleges, universities, or other institutions for scientific research.
- Contributions to social science or statistical research conducted by colleges, universities, or other institutions, as sanctioned under Section 35(1)(iii).
- Contributions to associations or institutions involved in rural development programs, as approved under Section 35CCA.
- Contributions to organisations that provide training for implementing rural development programs.
- Contributions to Public Sector Undertakings (PSUs), local authorities, or approved associations engaged in developmental projects, as agreed under Section 35AC.
- Contributions to notified Rural Development Funds, Funds for Afforestation, or the National Poverty Eradication Fund.
Note: If individuals have incurred losses from a business/profession, they can still benefit from deductions under Section 35AC, which can be carried forward as a loss to the following year. It is essential to remember that Section 80GGA does not allow double deductions for the same contribution.
Who is Eligible to Claim Deductions Under Section 80 GGA?
Individuals who make donations without engaging in any business or profession can qualify for deductions as per the eligibility criteria. However, those individuals who possess a business or enterprise can seek deductions under Section 35, subject to certain stipulations.
Moreover, they can also access information about applicable deductions and the specific factors that make them eligible for deductions under Section 80GGA of the Income Tax Act.
Documents Needed for Claiming Deductions Under Section 80GGA
To be eligible for deductions under Section 80GGA, specific documents are crucial to substantiate the donations made. Receipts bearing official stamps include:
- The name of the income tax assessee, along with the registration number assigned by the IT Department.
- Key information such as the organisation’s name, official stamp, donation date, and PAN (Permanent Account Number) details.
- A comprehensive breakdown of donated amounts and the registered name of the trust or organisation.
Note: Form 58, necessary for claiming 100% exemptions without limitations, must be obtained from the recipient organisation.
Payment Methods Under Section 80GGA
Taxpayers have the option to contribute through the subsequent payment methods:
- Demand draft
How to Claim a Deduction Under Section 80GGA?
When submitting your income tax returns, it is essential to include a receipt as supporting documentation. This receipt should carry specific details to validate your donation. The receipt should include key information like the organisation’s name, PAN, address and its official stamp. Additionally, the receipt must clearly state the exact amount contributed. By providing these details accurately, it is ensured that the charitable contributions are recognised and appropriately accounted for in the tax filing.
Sections 80GGA and Section 80G of the Income Tax Act provide valuable opportunities for taxpayers to claim deductions on charitable causes, rural development, and scientific research donations. By submitting the necessary documents and adhering to the specified guidelines, individuals and entities can enjoy tax benefits while contributing to philanthropic endeavours. However, it is crucial to ensure that donations comply with the prescribed modes and limits to qualify for these deductions. As responsible citizens, it is essential to stay informed about the eligible donations and the specific requirements under each section.