Section 80G deduction – Overview of Donations Eligible under Section 80G, 80G Exemption List

Introduction

If you have been a regular donor for any charity purpose and are looking for a deduction, then the Income Tax Act 1951 offers you the 80G deduction. Under the Income Tax Act of India, taxpayers may deduct contributions made to specific charitable organizations and funds under Section 80G. This section aims to offer tax advantages to people and organizations in exchange for their charitable donations.

The government offers this incentive to promote charitable giving and the work of nonprofit organizations, which can enhance society as a whole. The government wants to encourage more people to donate to charitable causes by offering tax benefits to donors. When filing their income tax returns, taxpayers must include information about their donations and the amount that qualifies for a Section 80G deduction limit.

What is 80G Deduction?

80G, as per the Income Tax Act 1961, is the deduction done on donations to specific charity organizations or funds. Both corporations and individuals are eligible for the deduction. The amount donated to qualified organizations or funds is eligible for the section 80G deduction. Depending on the organization or fund to which the donation was made, the deduction may be taken up to a maximum of 50% or 100% of the donation amount.

It’s crucial to remember that not all donations qualify for the section 80G deduction limit. The only gifts that qualify for a deduction are those donated to specific funds or organizations.

The organization or fund to which the donation has been made must provide the taxpayer with an 80G certificate or receipt for them to be able to claim the deduction under section 80G.

To claim a tax rebate under 80G, the individual has to submit the institution or fund’s registration number under section 80G; name, address, and PAN number should all be listed on the receipt.

Latest Update on 80G Deduction

In the budget 2023, there are updates about donations made to the following funds that don’t fall under the eligibility:

• Jawaharlal Nehru Memorial Fund
• Rajiv Gandhi Foundation
• Indira Gandhi Memorial Trust

There have been no changes in the 2024 budget.

Eligibility Criteria to Claim Deduction Under Section 80G.

Section 80G of the Income Tax Act allows gifts made to qualified charitable funds or institutions to be deductible for both companies and non-companies.

Under section 80G, the following people are eligible for a deduction:

•  Individuals
• Businesses Organizations
• Unified Hindu Family (HUF)
• Indian non-resident (NRI)
• Any other individual

It is crucial to remember that the only donations that can be deducted are those made to approved funds. Additionally, people who choose to adopt the new regime are not eligible for this deduction.

What Type and How much is 80G Deduction Eligible?

To be eligible for an 80G deduction, the donation must be in the form of money and not products or services to qualify for a deduction under Section 80G. Only donations made by cash, check, or electronic transfer are eligible for the deduction.

Furthermore, it is noteworthy that contributions made in cash above Rs. 2,000 will not qualify for the Section 80G deduction. Donors need to make sure they have a receipt for their money. The donation amount, the name and address of the charity organization or fund, and the organization or fund’s Section 80G registration number should all be included on the receipt.

Besides, the section 80GGA deduction is 100% made on donations towards scientific studies and initiatives for rural development. This deduction has two purposes: it promotes scientific achievements and rural development while also encouraging individuals to make charitable contributions.

When it comes to the 80GGA deduction limit, the individual will have a 100% deduction. Donations to organizations that follow the guidelines in this section are accepted in any amount, and they can take the form of cash, checks, or drafts.

Categories of Section 80G Deduction

Donations made under Section 80G are classified into four different categories. These are-

Donations with 100% deduction (No qualifying limit): Contributions made in this category are tax deductible at 100% and are not contingent on meeting any qualifying requirements. Deductions of this kind are allowed for contributions made to the Prime Minister’s National Relief Fund, the National Defence Fund, the National/State Blood Transfusion Council, and The National Foundation for Communal Harmony.

Contributions with a 50% Tax Deduction (No Qualifying Limit): Contributions to trusts such as the Indira Gandhi Memorial Fund, the National Children’s Fund, and the Prime Minister’s Drought Relief Fund are eligible for a 50% tax deduction on the amount donated.

100% deduction on Donations (subject to 10% of adjusted gross total income): Contributions to the Indian Olympic Association and local governments that support family planning are eligible for this category of deductions. Only 10% of the donor’s Adjusted Gross Total Income is deductible under certain circumstances. Any additional donations are rounded off by 10%.

50% deduction on donations (subject to 10% of adjusted gross total income): Contributions to the government or any local government that would use the funds for charitable purposes are eligible for deductions under this category. Only 10% of the donor’s Adjusted Gross Total Income is deductible under certain circumstances. Over this amount, donations are capped at 10%.

How can you claim an 80G Deduction while filing an ITR?

The taxpayer’s net taxable income is used for calculating their tax liability. After deducting all allowable deductions from a taxpayer’s gross total income, the net taxable income is determined. This implies that the Section 80G deduction will reduce the gross total income. The total of all sources of income, including salaries, dividends, capital gains, interest, rental income, and so on, is known as gross income.

The number of deductions under Section 80G can be a 50% or 100% deduction from the total amount provided. Contributions to specific organizations are fully deductible at 100% or 50% of the donation amount, with no upper limit.

One must provide the information about their donations in “Schedule 80G” on the ITR form for deductions under Section 80 G. According to the most recent modification, there is now a new column under “Table D” of ITR forms where disclosure of the ARN (donor reference number) is to be entered. This one is for those entities who meet the qualifying limit and are eligible for a 50% deduction.

To claim the deduction under section 80G, you need to fill following details while filing IT –

• Name of the Donee
• PAN of the Donee
• Address of the Donee
• The amount and breakup of contributions are in cash and other mode.
• The amount of deduction

What Documents are Required to Claim Section 80G Deduction?

Below are the documents the taxpayer has to submit to claim deduction under Section 80G.

Authenticated Receipt

A receipt from the trust or charity that receives the donation is required. Information such as the trust’s name, address, PAN number, the donation amount, and the donor’s name should all be included on this receipt.

Form 58

If a donor wants to claim a 100% deduction for their donation, they must have Form 58; otherwise, their donation will not qualify for a 100% deduction.

Trust Registration Number on Receipt

The Income Tax Department assigns a registration number to each qualifying trust; donors should make sure this number appears on their receipt. A donation may be subject to deductions if this registration number is not active on the date of the specific donation.

Photocopy of 80G certificate

Make sure you ask for a photocopy of the 80G certificate when getting a receipt for the donation made.

How to calculate 80G qualifying amount?

There are specific steps to follow to calculate the 80G qualifying amount. These are-

• Analyze the fund’s or charity institution’s classification (100% or 50% deduction, with or without a maximum or qualifying limit).
• There is no need to perform further calculations when a payment is made to the first category; declare 100% or 50% of the contribution amount as taxable income.
• Before contributing to the second category, you must ascertain your 80G deduction threshold, if applicable. The qualifying amount is a maximum of 10% of the adjusted gross total income.

Further, to calculate the amount of deduction, the formula used is:

• Gross Qualifying Limit = All donations made to Category – 2
• Net Qualifying Limit = It is 10% of the “adjusted gross total income”.
• Amount Deductible = 100% or 50% of the donation amount subject to the qualifying limit.

Here is an example presented of how the 80G deduction is calculated:

The taxable salary of Indian taxpayer Ramesh Sharma is Rs 5,00,000. He has made deposits of Rs 40,000 into the Public Provident Fund and Rs 40,000 into the Provident Fund of her Company. He gives the CRY (Child Relief and You) trust a donation of Rs 45,000. If he doesn’t earn anything else, the following formula will be used to determine his taxable income:

Overview of Section 80GGA

An individual or company donating to scientific research and agricultural development will get the deduction under Section 80GGA. All assessments are eligible for this deduction except individuals who have income (or loss) from a business or line of work.

Cash donations beyond Rs 10,000 are not eligible for tax deductions. However, donations in the form of checks, drafts, or cash are accepted. There are tax refunds available for all contributions or donations made in full.

Donations Eligible Under Section 80GGA

Any sum paid to educational institutes for scientific research, or any amount paid to a research organisation conducting scientific research, provided that the amount is approved by the designated authority under section 35(1)(ii) Amounts paid to a college, university, or other institution for the same purpose, as well as amounts given to a research organisation that carries out social scientific or statistical research, must both be approved by the designated body under section 35(1)(iii)

Amount payable to a registered agency or organisation that takes part in a section 35CCA-approved rural development initiative.

The sum paid to a recognized organisation or agency to encourage the public to embrace programs for rural development.

FAQs

Can I donate to the Prime Minister’s Relief Fund and claim a deduction under Section 80G?

Ans: Yes, you can claim deductions under Section 80G as it applies to both resident and non-resident Indians.

What is the total limit on Deduction in 80G?

Ans: The available Deductions = 100% of the amount donated

• The Deductions which are available = 50% of the amount donated
• The available Deductions = 100% of the amount donated but maximum up to the prescribed ceiling (10% of Adjusted Gross Total Income)
• The Deductions which are available = 50% of the amount donated but maximum up to the prescribed ceiling (10% of Adjusted Gross Total Income)

Is the employer eligible to give an 80G deduction?

Ans: No, the employer is not entitled to provide a deduction in Form-16. However, the taxpayer can claim a deduction under Section 80G while filing their Income Tax Return (ITR).