Making donations is one of the noblest ways to contribute towards the betterment of society. It is a straightforward way to help people in need. You must have also donated some money at some part of your life without even knowing the benefits that come with making donations. Making donations allows you to enjoy tax benefits under Section 80G of the Indian Tax Act.
The government of India has made donations beneficial for the taxpayers. The 80G section of the Indian Tax Act allows assesses to claim a tax deduction on the donations made to charitable organizations.
Section 80G Deduction: Overview
The Income Tax Act of India allows taxpayers to claim tax deductions for the donations made to prescribed funds of charitable organizations. Taxpayers can show the donations as deductions while filing ITR and enjoy tax benefits on their income. Any individual, firm, company, or HUF can claim the tax deduction under Section 80G.
Key Things to Know about Deduction Under 80G
There are a few important things and conditions under the 80G of Income Tax Act that you should know.
Who Can Claim Tax Deductions Under Section 80G?
The following entities can claim tax deductions under Section 80G:
- Individual taxpayers
- Firms
- Companies
- Hindu Undivided Families (HUFs)
What Qualifies for Tax Deductions Under Section 80G?
Only monetary donations made to charitable organizations qualify for Section 80G deduction. This includes donations made through:
- Cash (Including Online Donations)
- Cheque
- Draft
Donations in kind such as clothing, food, medicines, etc., do not qualify as an eligible donation under 80G for income tax deductions.
The important thing to know in this case is that from the financial year 2017-18, cash donations of only up to Rs 2,000 are eligible for deductions. The cash limit allowed for tax deductions before FY 2017-18 was Rs 10,000.
For example, if you have made a donation of Rs 3,000 to a charitable organization, you cannot show that as a deduction while filing ITR.
Section 80G Deduction Limit
Section 80G of the Indian Tax Act categories donations under two categories based on the maximum limit that can be claimed for tax deductions. All eligible donations are available for deduction either up to 100% or 50% along with the restrictions (if any) prescribed under Section 80G. Let us learn more about this in brief.
Donations Allowed for 100% Tax Exemption Under Section 80G
- National Defence Fund (set up by the Central Government)
- Prime Minister’s National Relief Fund
- National Illness Assistance Fund
- National Sports Fund
- National Cultural Fund
- National Foundation for Communal Harmony
- Technology Develop and Application Fund
- Any Indian State or Union Territory’s Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund
- Army Central Welfare Fund
- Air Force Central Welfare Fund
- Indian Naval Benevolent Fund
- Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996
- Chief Minister’s Earthquake Relief Fund, Maharashtra
- Maharashtra Chief Minister’s Relief Fund (1st October 1993, and 6th October 1993)
- Earthquake relief funds setup by Gujarat Government
- Trusts applicable under Section 80G(5C) made to offer relief to earthquake victims in Gujarat
- Africa (Public Contributions – India) Fund
- Clean Ganga Fund
- Prime Minister’s Armenia Earthquake Relief Fund
- Swachh Bharat Kosh
- National Fund for Control of Drug Abuse
Donations Allowed for 50% Tax Exemption Under Section 80G
- Rajiv Gandhi Foundation
- Prime Minister’s Drought Relief Fund
- Jawaharlal Nehru Memorial Fund
- Indira Gandhi Memorial Trust
Donations Allowed for 100% Tax Exemption Under Section 80G (Subject to 10% of Adjusted Gross Total Income)
- Donations made to a local authority or government institution that is to be used in programs and schemes related to family planning
- Donations made by a company to the Indian Olympic Association or any other institution working for the development of sports infrastructure or sponsoring any sports game in India
Donations Allowed for 50% Tax Exemption Under Section 80G (Subject to 10% of Adjusted Gross Total Income)
- Donations made to a charitable institution or fund meeting the eligibility criteria mentioned under Section 80G(5)
- Donations made to a local authority or government institution that is to be used in any charitable work other than family planning
- Donations made to any institution or authority working towards housing for people, or planning and development of cities, towns, and villages
- Donations made to an institution as per Section 10(26BB), working for the betterment of a minority community
- Donations made for repair, renovation, and maintenance of notified places of worship of all the religions
Adjusted Gross Total Income
Adjusted gross total income means the gross income minus adjustments to the gross income. The gross income includes income from all the sources such as your salary, capital gains, rental income, interest income, etc. While adjustments include deductions under Section 80C to 80U (except Section 80G), exempt income, STCG on shares, LTCG, income covered under Sections 115A, 115AB, 115AC, 115AD, and 115D.
Documents Required to Claim Deduction Under Section 80G
In order to claim income tax deduction under Section 80G, you need to furnish the following documents:
- Receipt for Donations Made: Receipts of all the donations, duly signed and should contain all necessary details such as the name of the charitable organization, PAN details, registration number of the organization, your name (donor’s name), etc.
- Form 58: Form 58 is necessary in case the taxpayers wants to claim a 100% deduction for the eligible donations
Besides Section 80G, there is another section, Section 80GGA as well that deals with donations of a different kind. Section 80GGA of the Income Tax Act allows deductions for donations made towards scientific research or the development of rural areas.
What is the maximum donation that I can make in cash?
There is no limit to the donation amount that can be made in cash. The limit is on income tax deduction. From FY 2017-18, cash donations of only up to Rs 2,000 are eligible for income tax deductions.
I do not have a receipt for the donation made, how can I claim a tax deduction?
You have to furnish the receipts of all the donations made in order to claim deduction while filing ITR. Without a receipt, you cannot claim a deduction for the particular donation.
What details should the donation receipt include?
The donation receipt should include the donor’s name (your’s), name of the charitable organization, registration number of the organization, and PAN details of the organization.
Is a partnership firm eligible to claim deductions for donations made?
Yes, a partnership is also eligible to claim income tax deductions for the donations made during a financial year.
What is Form 58?
Form 58 is necessary to claim 100% deductions on eligible donations. It contains details such as the cost of the project for which the donation is made, authorized amount and collected amount for the project, etc.