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Deduction under Section 80G- Income Tax Act

Deduction under Section 80G- Income Tax Act

Introduction

Section 80G of Income Tax Act give out deductions of donations made to any fund, institution or a charity. It is the best way to save tax by making donations towards charity that give deduction under Section 80G under Income Tax Act. Trust and institutions are also eligible under this deduction. Mainly, this deduction is given with an objective to achieve tax benefits if donations made to certain funds or charities by an individual. These types of deductions are given to an individual at the time of filing Income Tax Return.

Under Section 80G, all donations are not allowed as deduction. However, there are certain funds or institutions that are qualify for 100 % or 50% deduction without any qualifying limit. On the contrary, there are also certain funds or institutions that are qualify for 100% or 50% deduction with qualifying limit.

Who can claim deduction under Section 80G? 

These persons can claim deduction under Section 80G:

  • Individuals
  • Partnership firm
  • Hindu Undivided Family (HUF)
  • Company
  • Other types of taxpayer

These persons can claim deduction, subject to limits set by Government that are specified under Income Tax Act. NRI can also entitle to the benefits who is eligible for this deduction.

Deductions under Section 80G

Donations under Section 80G are classified into four categories. These are:

100% deduction (without any qualifying limit):

100% tax deduction is allowed to an individual without any qualifying limit under it. These donations are classify as deduction such as-

50% deduction (without any qualifying limit):

These donations are qualify for 50% deduction without any qualifying limit such as-

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

100% deduction (with qualifying limit)

100% deduction is allowed with qualifying limit if donations made to-

  • Government or any approved local authority, institution or association to be exercise for promoting family planning
  • Donations made to Indian Olympic Association for the development of infrastructure of sports and games in India or sponsorship of sports and games (Note: These deductions are only granted to companies)

However, deduction is allowed on these donations is 10% of Adjusted Gross Total Income (GTA).

50% deduction (with qualifying limit)

If donations made to any local authority or a government that are to be used for the charitable purposes are qualify with 50% deduction with qualifying limit. In these cases, 10% of Adjusted Gross Total Income (GTA) is allowed for the deductions.

What is Adjusted Gross Total Income?

Adjusted Gross Total Income refers to the auto sum of various types of income that comes under various heads as deducted by the following:

  • Long term capital gain
  • Short term capital gain under Sec 111A on sale of shares
  • Deductions under Section 80C to 80U (exclude Section 80G)
  • Exempt Income of the Act
  • Income referred to in Sections 115A, 115AB, 115AC or 115AD concerning to Non-residents and Foreign Companies

What is the Mode of payment for Donations under 80G?

The requirement of mode of payment for Donations under 80G can be made in cash, cheque or demand draft to claim tax benefit. Donations can be made in cash upto Rs. 2,000. Donations in any kind are not eligible under it. If donations  made in Clothes, Books, Medicines, Foods are not be eligible for deduction under Section 80G.

What are the required Documents to claim Tax Deduction under Section 80G?

These documents are required to claim tax deduction under Section 80G:

Donation Receipt:

It is mandatory to have a donation receipt that is issued by trusts or charity to claim tax deduction under Section 80G. This receipt should containing the details like Name, Address, PAN of the trust, Name of the donor and Amount of donation.

Form 58:

Form 58 is mandatory if deduction comes under 100% category on donation without which their donation will not be eligible for 100% deduction. This form will be provided on definite types of eligible conditions.

Registration number of trust:

Each trust should have registration number that is provided by IT department and donors should make sure their receipt containing this number. It is also mandatory that registration number and validity period should also mention in this receipt.

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