Section 80G - Tax Deduction for Donation

India holds a old-rich tradition and belief for Daan, Seva & Devotion and. Donating wealth and contributing for good causes is a practice that is done to earn solemn required for good deeds.

Indians have been donating in either through charitable organizations, NGOs, ashrams, temples, causes, etc. But, not many know that donations also helps you in tax savings. This is where Section 80G of IT Act comes into the picture. Take a read.

What is Section 80G?

Contributions made to specific charitable institutions and relief funds can easily be claimed as 80G Deduction as per the income tax Act. However, every sort of donation is not eligible for deduction.

Only such donations that have been made to assigned funds get qualified to claim a deduction. Also, it can be claimed by any taxpayer such as - company, individual, firm, or any other person.

Mode of Payment for Donation

Ensure donation is made through draft, cash, or cheque. Donating in cash should not exceed Rs. 10,000. The contributions made in the form of material, food, medicines, clothes, etc., are not eligible for deduction under Sec 80G.

Claiming the Deduction Under Section 80G

To claim deduction, you would have to mention certain details while filing your Income Tax Return, like:

• Donor's name
• Contributory amount
• Donor's Address
• Donor's PAN details

What is Adjusted Gross Total Income?

Adjusted Gross Total Income for 80G is the sum total of your income under all heads, but less than the amount mentioned below:

• Amount Deductible under Section 80C to 80U (but not Section 80G)
• Non-tax payable income
• Long-term Capital gains
• Short term Capital Gains under Section 111A
• Income mentioned in Sections 115A, 115AB, 115AC, or 115AD

Calculating the Tax Deduction

A few tax benefits do have some restrictions. While certain donations can have up to a 100% deduction, there are a few with limits. Generally, Section 80G categorizes donations under two different categories:

1. Donations without any upper limit

You can claim either 50% or 100% of the donation amount without any other limitation. The National Defence Fund and The Prime Minister's National Relief Fund are a few examples of funds set up by the central government on which 'without any maximum limit' and 100% deduction clauses are applicable. You can claim deduction on 100% of the amount donated.

Some of the funds allow you to claim only 50% of the amount donated.

2. Donations with upper limit

At the institutions where the 'with maximum limit' clause is applicable, you can claim either 100% or 50%. The upper limit is 10% of the “adjusted gross total income”.

To calculate deduction amount under this section, follow these steps:

• Check for the category in which charitable/ fund institution comes (50% or 100% deduction without or with a maximum limit)
• If you are paying payments to the 1st category, you would not have to calculate anything - simply claim 50% or 100% of the donation amount that is subjected to the taxable amount
• If you are paying a payment to the 2nd category, you would first have to find out the qualifying/ maximum limit. The qualifying amount is 10% of the adjusted gross total income

Now, use this formula to find out the deductible amount:

• Gross Qualifying Amount = All donations made to 2nd category
• Net Qualifying Amount/ Maximum Limit = This is 10% of the adjusted gross total income
• Amount Deductible = 100%/50% of the donation amount subject to a maximum limit

Eligible Donations Under Section 80GGA

Moving forward, only a certain number of donations are eligible for deduction under this section. Let's find out more about the same:

• Any amount paid to a research association which carries forward scientific research, statistical research or research in social science
• Any sum paid to a university, college, or other institution to use for scientific research, statistical research or research in social science approved by the authority under section 35(1) (ii)
• Sum paid to an approved institution or association that undertakes a rural development programme approved under section 35CCA
• An amount paid to an approved institution or association that conducts person(s) training for implementing different programs of rural development
• An amount paid to a local authority, approved institution or association, or a public sector company that carries out schemes as well as projects approved under section 35AC
• An amount paid to well-known National Poverty Eradication Fund, Fund for Afforestation and Rural Development Fund

Keep in mind that if a deduction has been approved under section 80GGA, these expenses will not be deductible under any other section of the Income Tax Act.

Conclusion

In the end, if you have been making donations for good causes and the welfare of the society, make sure that your contribution doesn’t go unnoticed. Get to know more about your donation category and claim deductions while filing ITR.