Understanding Section 80G: Tax Deductions for Donations towards social causes

Friday 19 February 2016

Have you ever donated funds for charity or social purposes? Or, have you made contributions towards any National Relief Fund? If your answer is yes, then you could utilize these donations to gain Income Tax benefits. The Income Tax Act, 1961 encourages charitable deeds and thus under Section 80G, it offers donation tax benefits to the donors.
 
 Section 80G of the Income Tax Act
 Section 80G offers tax deductions for donations made to certain charitable funds and institutions. Below we have provided details of this section:
 
 Eligibility
 Under Section 80-G of Income Tax Act, you are eligible for income tax deductions only for the amount which has been donated. Deductions can be claimed while filing the ITR (Income Tax Return). Tax deductions can be claimed by any tax payer irrespective of their source of income. This section is applicable to all assesses — whether a resident Indian or an NRI, HUF or a company — who make eligible donations.
 
 Deduction Limit
 The tax deduction limit under Section 80G of ITA is either 50% or 100%. It entirely depends on the charitable institution to which the amount is donated.
 
 Charitable organizations with 100% deduction without any qualifying limit:

  • Prime Minister’s National Relief Fund
  • National Defence Fund
  • Prime Minister’s Armenia Earthquake Relief Fund
  • The Africa (Public Contribution — India) Fund
  • The National Foundation for Communal Harmony
  • Approved university or educational institution of national eminence
  • The Chief Minister’s Earthquake Relief Fund, Maharashtra
  • Donations made to Zila Saksharta Samitis.
  • The National Blood Transfusion Council or a State Blood Transfusion Council.
  • The Army Central Welfare Fund or the Indian Naval Benevolent Fund or The Air Force Central Welfare Fund.
  • Army Central Welfare Fund, Indian Naval Ben. Fund, Air Force Central Welfare Fund.
  • National Illness Assistance Fund
  • Chief Minister’s or Lt. Governor’s Relief Fund
  • National Sports Fund
  • National Cultural Fund
  • Govt. / local authority/ institution/ association towards promoting family planning
  • Central Govt.’s Fund for Technology Development & Application
  • National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation & Multiple Disabilities
  • Indian Olympic Association/ other such notified association
  • Andhra Pradesh Chief Minister’s Cyclone Relied Fund

Charitable organizations with 50% deduction without any qualifying limit

  1. Jawaharlal Nehru Memorial Fund
  2. Prime Minister’s Drought Relief Fund
  3. National Children’s Fund
  4. Indira Gandhi Memorial Trust
  5. The Rajiv Gandhi Foundation
  6. Donations to govt./ local authority for charitable purposes (excluding family planning)
  7. Authority/ corporation having income exempt under erstwhile section or u/s 10(26BB)
  8. Donations for repair/ renovation of notified places of worship
  9. World Vision India
  10. UdavumKarangal

For certain donations, the aggregate deduction limits to 10 per cent of the ‘Adjusted Gross Total Income’. Thus, in such cases, even if you are donating funds eligible for deduction, it would be capped at 10 per cent of the Adjusted Gross Total Income — Gross total income minus long-term capital gain along with short term capital gain and all deduction under Section 80CCC to 80U except any deduction in this section.
 
 Donations to the following are subjected to 10% of Adjusted Gross Total Income:
 
 For 100% Deduction

  • Govt. or local authority for promoting family health planning
  • Sums paid to Indian Olympic Association

For 50% Deduction

  • Govt. or local authority for any charitable purposes other than family health planning.

Sub-sections of Section 80G, ITA
 One should not end up claiming tax deductions referring just to Section 80G. There are some sub-sections as well:
 
 Section 80GGA — 100% tax deduction is application for any donation made to entities in scientific research and rural development under this section.
 
 Section 80GGC — This section allows for 100% tax deduction for donations made towards a political party registered under Section 29A, Representation of the People Act, 1951or an electoral trust.
 
 Documents required for claiming Tax deductions
 Proper documentation is a must for gaining tax advantages with charity. Here’s a list of documents needed to claim deductions in Income Tax.

  • Stamped Receipt -A receipt with the name, address and PAN of the trust, the name of the donor and the amount donated is mandatory for claiming the donation rebate in income tax. In case of eligibility for 100% deduction Form-58 should also be attached.
  • Registration Number of the Trust –The receipt should also have the valid registration number of the trust with the dates of validity mentioned.
  • Photocopy of 80-G Certificate — Also ensure to attach the photocopy of 80-G certificate in addition to receipt.

Conclusion
 While true charity has no space for any thought of compensation; what goes around does come around in this world of Karma.
 
 The GOI on its part allows tax deductions to encourage more people to make donations to worthy causes. Therefore, all the kindness in form of charitable acts and donations return to the donators in the form of income tax benefits.
 
 Thus, as a smart move, the taxpayers may educate themselves on how to get exempted from Income Tax under Section 80G and at the same time they can support an NGO by being useful to others with charity.


Originally published at www.savethechildren.in.