Section 80G: Deduction in respect of Donation to certain Funds, Charitable Institutions, etc.

Deduction under Section 80G

Section 80G of the Income Tax Act, 1961 provides provisions for claiming deductions on donations made to certain funds, charitable institutions, and other specified entities. This section aims to encourage individuals and businesses to contribute towards charitable causes by providing them with tax benefits. By making eligible donations, taxpayers can reduce their taxable income and thereby lower their tax liability.

Deduction under Section 80G in respect of Donation to certain Funds, Charitable Institutions is available only with following essential conditions with steps:

Deduction under this section is available to any taxpayer (maybe resident or non-resident individual,  company, firm or any other person) and calculated under the following three steps:

Step 1 :  Gross qualifying amount

Step 2 : Net qualifying amount

Step 3 : Amount deductible

1.  Essential Conditions for claiming Deduction under this Section:

(1)        Deduction under this section is allowed to all assessees, whether company or non-company, whether having income under the head ‘profits and gains of business or profession’ or not.

(2)        The donation should be of a sum of money. Donations in kind do not qualify for deduction.

(3)        The donation should be made only to specified funds/institutions.

(4)        No deduction shall be allowed under this section in respect of donation of any sum exceeding Rs.2,000 unless such sum is paid by any mode other than cash.

(5)        For availing deduction under this section it is obligatory on the part of the assessee to produce proper proof of payment. Where the payment is not proved by production of proper receipt, etc., the deduction under section 80G is not available.

Where a deduction is allowed in respect of any donation for any assessment year, no other deduction shall be allowed in respect of such sum for the same or any other assessment year.
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Deduction u/s 80G is available on account of any donation made by the assessee to specified funds or institutions. In some cases, deduction is available after applying a qualifying limit while in others, it is allowed without applying any qualifying limit.

Again in some cases, deduction is allowed to the extent of 100% of the donation and in some cases it is allowed to the extent of 50% of the donation.

The quantum of deduction in respect of various kinds of donations is given as under:

(A) Donations made to following are eligible for 100% Deduction without any Qualifying Limit:

(1)        National Defense Fund set up by the Central Government.

(2)        Prime Minister’s National Relief Fund and PM CARES Fund;

(3)        Prime Minister’s Armenia Earthquake Relief Fund;

(4)        Africa (Public Contributions India) Fund;

(5)        National Foundation for Communal Harmony;

(6)        University/Educational Institution of National Eminence approved by the prescribed authority;

(7)        Maharashtra Chief Minister’s Earthquake Relief Fund;

(8)        Any fund set up by the State Government of Gujarat, exclusively for providing relief to the victims of earthquake in Gujarat;

(9)        Zila Saksharta Samiti constituted in any district;

(10)      The National Blood Transfusion Council or any State Blood Transfusion Council;

(11)      Any fund set up by a State Government to provide medical relief to the poor;

(12)      The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund;

(13)      The Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996;

(14)      National Illness Assistance Fund;

(15)      The Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund in respect of any State or Union Territory, as the case may be;

(16)      National Sports Fund set up by the Central Government;

(17)      National Cultural Fund set up by the Central Government;

(18)      Fund for Technology Development and Application, set up by the Central Government;

(19)      National Trust for Welfare of persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities;

(20)      National Children’s Fund.

(21)      Swachh Bharat Kosh set up by the Central Government;

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(22)      Clean Ganga Fund set up by the Central Government (In this case donations will be eligible for deduction only when they are made by a resident assessee);

(23)      The National Fund for Control of Drug Abuse.

(B) Donations made to the following are eligible for 50% Deduction without any Qualifying Limit:

(1)        Jawaharlal Nehru Memorial Fund;

(2)        Prime Minister’s Drought Relief Fund;

(3)        indira Gandhi Memorial Trust;

(4)        Rajiv Gandhi Foundation.

(C) Donations to the following are eligible for 100% Deduction subject to Qualifying limit:

(1)        Donation to Government or any approved local authority, institution or association to be utilised for promoting family planning.

(2)        Any sums paid by the assessee, being a company, in the previous year as donations to indian Olympic Association or to any other association or institution established in india and notified by the Central Government for—

(a)        the development of infrastructure for sports and games; or

(b)        the sponsorship of sports and games, in India.

(D) Donations to the following are eligible for 50% Deduction subject to Qualifying limit:

(1)        Donation to Government or any approved local authority, institution or association to be utilised for any charitable purpose other than promoting family planning.

(2)        Any other fund or institution which satisfies the conditions of section 80G(5).

(3)        To any authority constituted in India by or under any law for satisfying the need for housing accommodation or for the purpose of planning development or improvement of cities, towns and villages or for both.

(4)        To any corporation established by the Central or any State Government specified under section 10(26BB) for promoting interests of the members of a minority community.

(5)        Any notified temple, mosque, gurdwara, church or other place notified by the Central Government to be of historic, archaeological or artistic importance, for renovation or repair of such place.

For applying qualifying limit, all donations made to funds/institutions covered under (C) and (D) above shall be aggregated and the aggregate amount shall be limited to 10% of Adjusted Gross Total Income.

2.  Adjusted Gross Total Income:

Adjusted Gross Total Income for this purpose means the “Gross Total Income” as reduced by—

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(i)         long-term capital gains, if any, which have been included in the “Gross Total income”;

(ii)        short-term capital gains of the nature referred to in section 111A (i.e., short-term capital gain on transfer of shares through a recognised stock exchange which are taxable @ 15%);

(iii)       all deductions permissible u/s 80C to 80U excepting deduction under this section, i.e., section 80G;

(iv)       such income on which income-tax is not payable i.e., share from AOP;

(v)        income referred to in section 115A, 115AB, 115AC or 115AD. These sections relate to incomes of NRIs and foreign companies etc. which are taxable at special rate of tax.

3.  Quantum of Deduction:

The quantum of deduction shall be the aggregate of the deductions permissible under clauses (A), (B), (C) and (D) as mentioned above already.

Requirements for Claiming Deductions

To claim deductions under Section 80G, taxpayers need to ensure that they fulfill the following requirements:

  • Donations should be made in the form of cash, cheque, or draft. Donations made in kind are not eligible for deductions.
  • Donations should be supported by valid receipts and certificates issued by the recipient entity. These receipts should contain all the necessary details, including the name and address of the entity, the PAN of the entity, and the PAN of the taxpayer.
  • The taxpayer should ensure that the entity to which the donation is made is eligible for deductions under Section 80G. It is advisable to check the list of eligible entities provided by the Income Tax Department.

Example:

Let’s say Mr. X has made a donation of Rs. 10,000 to a charitable institution that is approved by the Central Government. The charitable institution provides relief to the poor and needy.

Mr. X is eligible to claim a deduction of Rs. 10,000 under Section 80G for the donation made to the charitable institution.

Important Points to Note

  • The deduction under Section 80G is available over and above the deduction of Rs. 1.5 lakh under Section 80C.
  • The deduction is not available for donations made to political parties or electoral trusts.
  • The deduction is not available for donations made in return for any benefit, such as goods or services.

Section 80G of the Income Tax Act, 1961 is a beneficial provision that encourages individuals and businesses to contribute towards charitable causes. By availing the tax deductions available under this section, taxpayers not only support worthy initiatives but also reduce their tax liability. It is essential to be aware of the eligible entities and the specific deduction limits while making donations. By following the necessary procedures and keeping proper documentation, taxpayers can effectively claim deductions under Section 80G and contribute to the betterment of society.

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